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Becoming A Successful Buy Here Pay Here (BHPH) Dealer


Becoming a Successful Buy Here Pay Here (BHPH) Dealer

The mortgage mess and the worsening economic market may diminish sales for franchised car and truck dealers, but not necessarily for buy here pay here (BHPH) dealerships.

Yes, the mortgage crunch has pushed most of the BHPH customers' credit scores down, but not by a large amount. “Customers are out there, even if the economy is good or bad”, says Larry Violette, the proud owner of Liberty Cars and Trucks of Phoenix, AZ. That is one of the good things about BHPH businesses, the bad is that being a successful BHPH dealer requires skills that are not usually required by car dealers, which include:

• Persistence to keep collections current

• Tolerance for the customer skipping a payment

• Competence to thoroughly monitor the cash flow

• The capability to secure the finances of a high-risk buyer

Alright, so most of these skills are shared by most dealers, but the BHPH dealer is mainly a solo act operating without training wheels. A few wrong moves and they fail. That is vital information to keep in mind when a used car and truck dealer explores this kind of marketing.

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BHPH Market

A typical vehicle sold by BHPH dealers usually sells for about $10,000. A majority of buyers are males ranging between the ages of 25 to 40, who have worked at their current job for about a year, with most of them as renters, their average monthly salary is about $2,000, and most of them have credit scores ranging between 350 and 400. They are true payment customers.

For BHPH dealers, their average income per deal is about $3,500 to $4,000, with the average cost to refurbish a vehicle being $4,900, and an average period of time being 34 months. Eighty-five percent of vehicles in the BHPH lot originate from auctions and dealers are having to keep their inventory from expanding outwards. On average, a vehicle will remain in inventory for about 3 months. Generally, thirty percent of the deals that a BHPH dealer puts on the street will fail - requiring repossession and transfer back to the dealership.


A Cash Flow Company

A BHPH company runs mainly on cash flow. Cash flow is one of the most critical considerations to manage, watch, and request.

Anyone who gets into the business knows it will take a lot of money. Cash flow is unlike a financial gain or whatever you might see on paper. Cash flow basically means how much you're going to be putting in your pocket. A fair amount of BHPH dealers say that their financial gain is acceptable and that they're making such and such dollars a month, but they're still having to fund the company from their own pocket. Given the cash flow affects the business, BHPH dealers need to pay special attention to it. Their goal is to slow the outflow as much as possible and there are multiple ways to do this:

• Improve ways in weeding out dodgy customers

• Obtain inventory at a good price

• Reduce staff

• Improve collections, get deserted or repossessed vehicles quickly back on the lot

• Look for ways to reduce market costs without negatively affecting your business opportunities

• Execute ways to decrease transportation costs for new vehicles

• Reduce other items such as rent and utilities

Any amount of these points can assist in reducing the costs - meaning more money can stay in your pocket. Some of the points, like reducing rent, might not be something that can be executed quickly, but taking care of inventory, transportation, and marketing costs should do the trick.


Underwriting is Important

Given the experiences of many BHPH customers, many BHPH dealers are inclined to refuse any checking of the customer's risks Yet underwriting should be carried out, even if it's only to verify a place of employment and residence.



If underwriting is tight, your collectors still have a task to do. Getting the payments in-store, when it's due is crucial to the cash flow.

Dealers are learning to put tracking and starter interrupt technology on vehicles to secure a deal.


Two options can help advance collections

The first option is to outsource collections to a professional collection company. This is probably one way for you to decrease overhead and improve cash flow, while at the same time getting more payments in-store to guarantee profitability.

The second option is to install a payment protection device, otherwise known as a starter interrupt, on all of the vehicles sold.

Sekurus International markets two different interrupt devices: A code-based device that calls for the owner to input a code into a vehicle-mounted device in order to start the vehicle because the code you need will be changed monthly, skipped payments or nonpayment will eventually lead to the vehicle to not start. The second device is GPS-based and doesn't need a code to operate, alternatively is lets the dealer track the vehicle's location and finds it quickly if in need of repossessing.


Capital Origins

Capital origins today are setting mileage restrictions with the max amount of 100,000 miles, for vehicles no more than 10 years old, and terms in the 30-month range.

These restrictions are forcing dealers to pay close attention to how they create their deals, with an eye toward a higher chance of the customer paying the full term of this note. In today's market, BHPH dealers should be asking for higher down payments and limiting their terms to 25 to 30 months, if they would like to have their deal funded.

While capital funding have tightened, they're still there for the right investor, while wholesale prices for inventory continue to decrease. After post-hurricane Katrina, wholesale prices jumped as the disaster wiped out a substantial amount of used vehicles. This pressure has greatly reduced and the supply of vehicles is better, resulting in lower prices.



Independent dealers were early adopters of the marketing mediums involving the internet. In fact, at a recent discussion sponsored by AutoUpLinkUSA, CarFax, eBay Motors, and other online marketing creators, it was noted that the most aggressive exploiters of online classified vehicle ads are independent dealers.

Digital marketing tools like this are perfect for BHPH dealers. While some BHPH dealers probably work under the belief that their buyers don't have or use computers, experts in the field say that's not true.

BHPH dealers looking for a way to improve their profitability in today's market will do well to welcome in new business practices that decrease risk and assist them in handling risks.

Experts offer suggestions to BHPH dealers to implement business processes that

• Insist on more diligent collections

• Acquire more effective marketing tools

• Support improved underwriting practices

• Call for the use of payment-protection devices on all vehicles purchased

By embracing these marketing tools, the BHPH dealer can also diminish their marketing costs. Additionally, marketing tools such as online advertising not only assist the dealer in getting buyers to reach out to them more affordably. They also help them brand their dealership.

Lastly, BHPH dealers must communicate better with their buyers after the sale to strengthen the relationship between the customer and the dealer.

If your credit is suffering from financial mistakes made in your past, look no further than our Buy Here Pay Here Financing Department. We work with people like you who have less than perfect credit or no credit at all to ensure that you get a fair deal on a vehicle that you want to drive at rates that are relatively fair. The best way to find out about interest rates and payment is to contact our Finance Department to discuss your options. In fact, you can pick up the phone and Call 602 331-3333 and one of our Service Managers can have you behind the wheel of a vehicle sooner than you think. Our auto and truck Finance Office professionals are friendly and willing to work within your budget to find you a vehicle that best suits your needs.

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