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Old 09-01-2009, 11:55 AM   #1
XDCX
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Default Buy Here, Pay Here Thread

One of our members, zophy, has offered to share her experience and answer some questions about her Buy Here, Pay Here (BHPH) operation.

I love the concept of BHPH, but I've always heard that it's a lot of work and you have to be fully committed if you want it to be successful. That said, what I've heard isn't important, I'd rather hear from zophy and let her share her experiences.

So, here are the first questions for zophy:
  • Is it hard for a dealer to get started with a BHPH operation?
  • Do you have to get any permits/licenses to be able to extend credit?
  • Are there any interest rate caps in your state?
Thanks in advance to zophy for offering to share her experience. If any of our other members have something to add or want to ask a question, please feel free to post in this thread.
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Old 09-01-2009, 12:44 PM   #2
zohpy
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Had a nice long response all ready to post and I timed out. Now I have a customer so I will get back to you this evening. Thanks X-man for starting the thread.
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Old 09-01-2009, 01:49 PM   #3
CarguyCO
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Looking forward to this thread.......
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Old 09-01-2009, 07:46 PM   #4
jules4jeeps
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I am too. BHPH seems so "in the deep end of the ocean" as far as the car biz goes. Edumacate me Rae!
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Old 09-01-2009, 07:59 PM   #5
zohpy
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I'll do these 1 by 1 as it's late and I don't want to time out again.
So is it hard to get started. That depends a lot about how far in you want to jump.
If you are not 100% committed to doing in both monetairly and theoretically don't bother. If you are the level of satisfaction you receive as a person and in your pocketbook can be amazing.
Say you want to do 40k worth of units in the first month or year. You better have at least (and I mean bear bones) 120k for the program. You need to buy the inventory and I don't mean just sleds. You need good reliable transportation that will not break down on customers. Fact of the matter is if it doesn't run they don't have the money to fix it and they are not gonna pay you. You will also have to pay all the taxes on these units up front as well as tag and license fees. You'll also have to replace your inventory. As my favorite DP used to tell me "I can't sell a empty space on the lot". You will need to have a great support staff in place and you must be willing to pay them well. A BHPH deal is usually handled by one person from front to back, so you must be willing to pay them that way.
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Old 09-01-2009, 08:04 PM   #6
jules4jeeps
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(Ahem, the "time-out" thing is annoying Mr Xman, anything you can do about that?)
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Old 09-01-2009, 08:07 PM   #7
zohpy
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Do you have to get special permits and licenses.

In our state (FL) yes. We set up a seperate corp to act as the lein holder and to accept payments. The cost was nominal so it was pretty much a no brainer. You need to learn how to do everything by the book as you are now the bank. You need to know how you can do collection calls and when you can do them. You also need to learn all about repo laws ect... We've been very fortunate in the fact that we've had very few repos and the ones we have had were fairly easy. Of course we live in a small rural town so that has it's advantages. It also has disadvantages as a car/truck can be hidden easily in the middle of an orange grove or ranch. We also have a Seminole Indian reservation nearby which comes with a whole new set of problems.
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Old 09-01-2009, 08:22 PM   #8
zohpy
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Are there interest rate caps in my state.

Yes, and guess what I don't use them. The majority of my clients are at 18% on a simple interest contract. I think the highest I ever charged was 21%. I don't want to set these folks up for faliure, I want them to succeed. The majority of my loans are also for very short term. 18 to 30 months at best. I sit and have a very thorough budget evaluation with the customer before he gets a choice of several trucks, cars or SUV's. Whatever it is that the customer wants. If he/she has picked out the unit, the likelyhood of repayment improves tremendously.
I stay in touch with my customers every 10 days or so in the begining before their 1st payment is even due. I want to make sure the vehicle is running properly and that it is in fact suiting their needs. I get to know their families, make sure they still have the same phones, jobs and insurance.
I actually had a guy call me yesterday that wanted to know if it was ok if he gave me extra money every month. He had gotten a raise and wanted to pay me off early. I told him to come on in as he's more than halfway through his first loan and has a baby on the way. Jason I said "that single cab truck isn't gonna work in a few months, maybe we should start looking at something different now". Long story short he is now on unit #2 for my BHPH portfolio and sends me more referrals than I can handle at times.

Long and short of it for me, there is no feeling in the world of truly helping someone that everyone else has said no to. The look on their face is priceless when they get that vehicle and it's not some ragged out dented up black smoke belching POS. It's a vehicle they are proud to take their parents out to dinner in or to drop their kids off to school in because they know it's safe and looks good to. These are the folks who will be customers for life. Oh and the money we are talking about here is not chump change.
Maybe I handle my portfolio different than most but these are my customers and my bosses name is on the back of their cars.

Last edited by zohpy; 09-01-2009 at 08:24 PM. Reason: spelling errors
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Old 09-02-2009, 11:48 AM   #9
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Quote:
Originally Posted by jules4jeeps View Post
(Ahem, the "time-out" thing is annoying Mr Xman, anything you can do about that?)
Yes, I just changed the time-out setting from 15 minutes to 30 minutes.

Also, if you're ever in the middle of a post and you're not sure if your session has timed-out, my suggestion is to open a new window and access the site. If your original session has timed-out you can log-in on the second window and it resets the timer. That way you don't lose a long post. (I've had the same experience and I HATE to have to re-type something I've already done.)
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Old 09-02-2009, 12:06 PM   #10
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zophy - Thanks for the information, that was awesome.

I thought the information about the required capital was very interesting. I can see where a dealer who was doing $40K/month with an average contract length of 24 months could reach a $1 Million portfolio pretty quickly.

That said, I smiled when you spoke of the profit potential. I'm willing to bet you make more gross on a $4,000 BHPH unit than most Jeep dealers make on a $40K Grand Cherokee.

I also like how you start the sales process with a customer interview - I used to refer to this as doing the car deal "backwards." It always used to frustrate me when a salesperson would get a customer excited about a vehicle they couldn't afford and then bring the deal to the desk. It's much smarter to figure out what the customer can afford and THEN get them excited about a vehicle.

Thanks again for the info - hopefully others will chime in with their questions too.
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Old 12-01-2009, 10:45 AM   #11
XDCX
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Default BHPH Operations that report to the Credit Bureaus?

I thought of this thread the other day when I saw a BHPH dealer advertise that they reported their customer's repayment performance to the credit bureaus. The "spin" was that this would help their customers rebuild their credit score.

Is this a common practice, or something unique that this dealer thought up?

On a different note, do most BHPH operations fund 100% of their own paper or do they solicit outside investors? With CDs earning less than 2% I imagine there are people who are willing to take on some risk for a higher rate of return.
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