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Basic Fundamentals of BHPH

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Basic Fundamentals of BHPH

Neil Fisher- Regional Vice President, Automotive Solutions

The Buy Here Pay Here option can be a very viable and profitable alternative for financing customers in the far end of the credit spectrum. These customers are typically considered to be a credit score of below 550, and this is common during the economic whirlwind today. BHPH affords you, the dealer, the opportunity to take your business in your own hands, decrease your dependency on outside financing sources and at the same time, build a portfolio of wealth. If you master each of these following fundamentals you will see your dealership on the up side of business no matter the condition of the economy around you. We’ve compiled this list of Fundamental Basics to assist you and your sales force to stay ahead of the game.

1. Commitment -The number-one difference between special finance and BHPH is whose money you are using. When it’s your own money, the first fundamental is practically a commandment. You must be fully committed to the business with your heart, soul, mind and resources, and keep your focus on the long-term benefits instead of the short-term profits.

2. Capitalization – BHPH is a long-term business venture that requires capital investment. You need enough cash to consistently fund your portfolio for the first two years of operations. Otherwise, you have to start small and grow your portfolio one deal at a time. You’ll still get there. It will just take you longer. The point is you have to think about how to fund your portfolio whether it’s one deal per month or 100.

3. Collections – Selling cars is the easy part. Collecting the payments after the sale is a completely different story. This part of the business is not rocket science. It is, however, a little four-letter word called “work” that is the fundamental element of your entire BHPH business. Your ability to collect on the loans will make or break your success and is the one fundamental around which the entire program is built.

4. Compliance – As a BHPH dealer, you are a lender, a collector and a keeper of hoards of private, personal information regarding your customer base. The compliance requirements you are used to as a dealer only compound with these responsibilities, and there is little room for error.

5. Investigative Selling – Before you loan money to someone, you really need to know a few things about them. Investigative selling is an important step to setting up each individual deal for success. During the interview process, you can learn volumes about the spending and living habits of your prospective customer that will be helpful if you have to find your collateral later. Their answers to routine questions will give you valuable insight in helping to determine whether the deal makes sense for your business.

6. Inventory – The vehicles you sell must be desirable and affordable for your customer. They must also be able to last the term of the contracts. And although your inventory values may not be tied directly to a valuation guide, one of the worst things you can do is stretch your ACVs too far above the market value. Your portfolio will quickly become unrealistically inflated.

7. Metrics – Every day you must be able to accurately review the books of the business and hold the team accountable for performance. BHPH is a daily business, so you need accurate metrics to help you make the most informed decisions possible.

8. Deal Structure – The structure of the deal determines the elements of risk, how much cash you are willing to put on the street and your profit margin, above an allocated “discount” that covers your standard losses. Without enough margin built into each deal of your portfolio, your losses will consume any profits.

9. Consistency – BHPH requires patience, persistence and consistency. It is about repeatedly doing processes and procedures correctly and keeping your eye on the long-term goal.

10. Underwriting – Your underwriting guidelines are your roadmap to building a successful portfolio. You would be doing yourself a favor if you follow the lead of some crafty veterans like Credit Acceptance and Drive Financial and verify every aspect and stipulation of each and every deal before you fund it. Your guidelines are in place to help you manage the risk of your portfolio, and there is absolutely no room for shortcuts. Fundamentals, you will be well on your way to enjoying the benefits of one of the best business decisions that can be made in the automotive industry, especially today.

Implementing GPS vehicle tracking can significantly impact the ease of which adhering to these guidelines is done. With 24/7 watch of your assets, you are able to sell more vehicles, protect your collateral and increase your loan portfolio. GoldStar GPS, Guided by Spireon, is the number one provider of GPS vehicle tracking devices on the market, to learn more feel free to email me @ or visit

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