For some time, buy-here, pay-here has had the image of an operation not particularly good for new car franchisees. To begin with, due to the difference in demographic of the customer, new car franchise staff and owners have been concerned that they would have too many BHPH customers tieing them up in their new car showrooms.In addition, there may have been a concern that once a new car store became known for selling buy here pay here, the average Fico score of its’ customers may drop, and the retail banks approval rates may go down for their “good” credit customers. Some of these may be true, but the benefits are so strong and there are ways to do BHPH without having the negatives.

You will have to make a commitment to this mentally, financially and with your time. I like to think of it as another franchise with very good long term possibilities, but it will need some attention.

How to start…

1) You need to get an education in Buy Here Pay Here.
Start by going to the NABD web site (National Association of BHPH Dealers). There are a list of resources, seminars and free stuff to get you started. Both CarBiz and Leedom Associates and many others offer training also.

Then join a twenty group. These are offered specifically for BHPH by NCM, CarBiz and Leedom Associates. You will learn more here than you can use, but it also is intensive and if you are not open to friendly criticism, stressful.

2) You have to figure out how much you want to invest, before you decide how large and how fast you want to grow. The negative cash flow numbers can be HUGE ( they can be $100′s of thousands a year if you are not careful). Slow solid growth is the way to go.

3) For new franchise dealers, you need a separate lot, with a new company name to make this work and BHPH personnel. Your new car people will not be able to make the adjustment without some physical separation.

4) Be sure to set your underwriting guidelines and deal structure (how much your cars cost, the profit and how much money you want at risk per deal) before the first car is delivered.

5) You need experienced collectors. It will not pay out if put good cars and good loans on the books, but have poor collection. Buy Here Pay Here is more of a collection business than a sales business.

6) Many of the trade ins you are currently sending to auction will be your BHPH inventory. You will also need a special buyer to buy your BHPH inventory. It takes a different look and feel to buy these cars. They are typically higher mileage and older but need to be solid,reliable cars. You may be able to write more new car deals also as, now the trades are worth a little more to you.

It’s a little work, but like I said, treat it as a another franchise. How much would you invest to have a franchise today that can sell into a credit challenged market like we have today?

Charles Pompey is the owner of DigAps.com and Car-Lotta Credit. DigAps.com…Comprehensive Web Sites and Internet Merchandising ONLY for Buy Here Pay Here dealers. Charley builds BHPH web sites, improves web site performance, PPC programs, advertising consulting and speaks to 20 groups, dealer groups, and is available for speaking engagements.

Please feel free to visit my web site at http://www.digaps.com or for free info, my blog at http://www.digapsblog.com. DIGA? Does It Get Aps?

My first suggestion always is to put your BHPH location away from your new store completely. It prevents confusion for your people and customers.

To begin with, understand that you need to physically separate your inventory from your normal used car operation. The customers you will have, always want the best vehicle for their money. So, if the retail used car inventory is parked in the same row as your BHPH, they will want those vehicles and not the ones they can afford in your program. It is better not to set their standards too high to start with. This also helps your salespeople stay in the BHPH mental state with your customers.

Although I believe that all my customers are equal, I have found in the past that many employees of new car stores feel that the buy here pay here customer is not the same as a retail customer. They therefore, may treat them differently. One of the main benefits of having a separate facility is to make and keep your customers comfortable and relaxed. Think about it, they probably have been treated roughly at one, or more, new car stores already because of their credit. Make them feel welcome.

Once you deliver the car to your customers, they will then be making payments every week or month, depending on their payment schedule. That means they will be stopping by to do this. The steady flow of customers can be disruptive in a new car showroom or lot.

Finally, the separate lot will help allow you to market and merchandise the operation independent from your new car store. A different name, web site and logo can be very helpful.

It will cost more money to do it this way. But it will increase your returns, sales and collections.

Charles Pompey is the owner of DigAps.com and Car-Lotta Credit.

DigAps.com…Comprehensive Web Sites and Internet Merchandising ONLY for Buy Here Pay Here dealers. Charley builds results oriented BHPH web sites, improves existing web site performance, manages PPC programs, does advertising consulting, speaks to 20 groups, dealer groups, and is available for individual consulting and speaking engagements. DigAps.com will get you additional credit applications, and sales, from your website in the first 30 days!

Please feel free to visit my blog for free BHPH info at http://www.digapsblog.com or my website http://www.digaps.com…Does It Get Aps? DIGA?

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