Imagine a ladder. On this ladder there are 5 rungs. These rungs are labeled Prime, Near Prime, Sub Prime, Below Sub Prime and BHPH. These are all the various credit categories your customers fall into. People are moving both up and down this ladder as their circumstances change and their credit improves or weakens. If you have a method in place to sell and finance all 5 categories then you can serve all of these customers. Now, imagine the bottom rung is missing. As things happen in your existing customer’s lives and they run into situations that has caused their credit to deteriorate or as your lenders continue to adjust the criteria for each rung, some of these current customers will move down to the BHPH rung. If you do not have the ability to finance these customers, you will lose their business. This also holds true if you have not chosen to take advantage of the growing Below Sub Prime market, as well. Now, imagine customers at a BHPH store who correct some of their credit deficiencies, get a better job with more income, become more stable with longer residence or job time and/or bring current their delinquent obligations. If that BHPH store is yours, these customers will remember who helped them when they needed a hand and move up the ladder within your organization. If it is not your BHPH store, what reason will they have for choosing to do business with you?
In my mind, that is the primary reason for any dealer to enter the BHPH business – to cover the entire spectrum of customers in your market. If you can do so profitably, why ignore any group of potential customers? Of course, BHPH will also allow you to retail vehicles that you currently wholesale for increased profits – selling to customers you currently ignore. It allows you to invest your cash in vehicle receivable and obtain a return on your investment unavailable in any other current investment; certainly more than savings or the stock market. And, done right, it provides a valuable service in your community that can enhance your organization’s reputation and image plus make a better ROI than any other department in your operation.
But proceed with caution, the BHPH business is not the car business; it is the finance business. If your BHPH business is generating 25 – 30 new auto loans per month, you will be outperforming many small town banks. You must do the proper research and planning to understand this business. Read everything you can get your hands on, consult with experts and create a solid business plan. Do it right and BHPH can be a real asset to your operation and to your community.