Used Car Dealer Magazine

FEB 2018

Used Car Dealer Magazine, the official monthly trade magazine of NIADA, offers readers the most current news and info on such topics as industry trends,technology,financing,marketing and dealership operations designed to increase profitability.

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Page 68 of 78

FEBRUARY 2018 ← BHPH DEALER 11 MARK DUBOIS IS A MODERATOR FOR NIADA DEALER 20 GROUPS AND AN AUTO INDUSTRY VETERAN WITH MORE THAN 35 YEARS OF EXPERIENCE. HE CAN BE REACHED AT MARK@NIADA.COM. type of vehicle the customer needs. The next step is to determine what payment the customer can afford. That is usually where the errors happen. If customers are in control, they will select the vehicle they want. If the finance specialist is in control, he or she will select a vehicle the customer can afford. The success of your collection efforts will be driven by which of those two scenarios happens. BHPH financing provides a variety of creative ways to make a payment fit the customer. That step is where the most discipline and oversight must be taken by the management team. Best practices in BHPH financing tell you not to let a large down payment affect your finance decision. A large down payment does not always translate into payment success. A better approach is to permit a large down payment to improve the deal structure. The underwriting process should be used to confirm the customer's stability and ability to pay before the financing is approved. Another common mistake used to make a payment "fit" the customer is to extend the term of the financing and lower the payment. That approach might look like a solution on the surface, but in reality it just transfers the risk of the financing to the end of the note. Longer terms are the enemy in BHPH financing. While it's difficult to predict the life of a vehicle when structuring the financing, best practices in BHPH financing tell you to determine the sales price, down payment, payment amount and term of the financing before a vehicle is put on the lot for sale. That approach permits the management team to monitor deal structure based on pre-determined variables and avoid "creative financing" that pushes the term out further than it should. "Sales" in a BHPH business is more about helping the customer get approved for financing than it is about selling a vehicle. The role of a finance specialist requires different skill sets than a typical sales rep. For a finance specialist, the focus is on the customer, the deal structure and a payment the customer can afford. A BHPH customer does not need to be "sold," but to be "told." BHPH financing has been around for a long time. The typical used car sales rep is not a good fit for a BHPH business. If putting high-risk customers in payments they can afford is your business model, consider the concept that in BHPH "sales" is an oxymoron. FOR A FINANCE SPECIALIST, THE FOCUS IS ON THE CUSTOMER, THE DEAL STRUCTURE AND A PAYMENT THE CUSTOMER CAN AFFORD.

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