BHPH Report B6-1HUV0 : Page 1

A new season of reason for the CFPB? 14 18 Ways of planning for a better 2017 With 2017 ahead, time for your compliance checkup 20 A Publication of NABD and SubPrime Auto Finance News November/December 2016 | Volume 3 | No. 6 How dealers overcome inventory mistakes By Nick Zulovich, Senior Editor ORLANDO, Fla. — When a collection of oper-ators came together for a panel discussion near the close of the National Alliance of Buy-Here, Pay-Here Dealers’ conference at the beginning of November, it didn’t take long for many of the panelists to mention mistakes involving inventory and steps they took to keep the impact to a minimum. Aft ab Rahmtulla owns and operates Shahana Mo-tors in Houston. Rahmtulla’s BHPH career began back in 1979 and his family-owned store sits in one of the most competitive markets in the country, ac-cording to NABD co-founder Ken Shilson, who as-sembled the panel and hosted the discussion in Orlando, Fla. Rahmtulla recalled that back in 2012 his store was “making really good money,” but word came that large, well-capitalized competitors were coming to Houston, including DriveTime and J.D. Byrider. “I sat down with my family and asked what we should do about it,” Rahmtulla told attendees. “Th ey would be buying cars from the same places we would, and they would be selling to the same customers. We decided to do something diff erent, and it was my Photo by Nick Zulovich Pictured from left at NABD’s fall conference are Graham Lathrop of V.P. Auto Sales in Garland, Texas, Tahl Benit of Lake Erie Auto Credit in Cleveland and Aftab Rahmtulla of Shahana Motors in Houston. idea. We got into European cars like BMW, Range Rover and Mercedes.” It turned out to be an immense mistake that took Shahana Motors more than a year to overcome. While Rahmtulla was getting as much as $7,000 for down payments on these luxury vehicles, they soon ended DEALERS continued on page 3 Many buy-here, pay-here operators are straightforward busi-nesspeople who have little time to dillydally when it comes to run-ning their dealerships. It’s why we created this listing titled simply as the “Best of BHPH.” Contained in this issue is a comprehensive collection of important service providers and other support organi-zations and entities that can help operators of all sizes and locations. Some of the ones included in the “Best of BHPH” have been in busi-ness for decades and are well known. Others are start-ups that al-ready have carved out an important place in the industry. No mat-ter, the “Best of BHPH” is aimed at being a resource for buy-here, pay-here operators to leverage along with some expert perspective on how 2016 unfolded and what might be ahead. BEST OF BHPH continued on page 4 Ways DRN data can augment operators’ GPS usage By Nick Zulovich, Senior Editor FORT WORTH, Texas — Buy-here, pay-here dealers using GPS devices to track their vehicles isn’t a new development. Sev-eral of the industry’s largest GPS providers are seeing widespread usage of the devices that can help when collection eff orts deterio-rate to the point where a repossession might be necessary. Meanwhile, Digital Recognition Net-work is looking to grab a stronger toehold in the BHPH space not as a GPS replacement, but rather as a data provider to augment in-formation the device might already provide to boost an important metric — recoveries. DRN vice president of fi nancial servic-es Jeremiah Wheeler explained to BHPH Report what the company is looking to bring to all sizes of operators, whether they have 50 units “out on the street,” or 500 or 5,000. Wheeler indicated that DRN’s net-work captures about 140 million license plate scans each month with its license-plate recognition technology. He’s confi dent that DRN has scanned many, if not most, of the vehicles in a BHPH dealership’s related fi -nance company portfolio. “What we’ve typically seen with buy-here, pay-here dealers using GPS devices is about 40 percent of the GPS devices are not working or giving inaccurate information,” Wheeler said. “Some (BHPH dealers) don’t even use them at all so they don’t have ac-cess to that data. “Th at’s where we start when talking about augmenting other data sets and oth-er skip-tracing tools. We step in and say, ‘Let’s start with the stuff you can’t fi nd through traditional means and methods. Th en let’s work our way back into the cycle,’” Wheeler continued. “Once we on-board a client, they can use our data — even on the units that al-ready have GPS — to make sure it is accu-rate and to make sure there are no other DRN continued on page 3 Cherokee Automotive Group | 301 Cascade Pointe Lane | Cary, NC 27513 NextGear Capital offers the competitive pricing, flexible terms and unparalleled access you’d expect from an industry leader, with the dedicated, attentive support you want in a local provider. E. GREENVILLE, PA US POSTAGE PAID PRSRT STD Permit No. 555

How Dealers Overcome Inventory Mistakes

Nick Zulovich, Senior Editor

ORLANDO, Fla. — When a collection of operators came together for a panel discussion near the close of the National Alliance of Buy-Here, Pay-Here Dealers’ conference at the beginning of November, it didn’t take long for many of the panelists to mention mistakes involving inventory and steps they took to keep the impact to a minimum.

Aftab Rahmtulla owns and operates Shahana Motors in Houston. Rahmtulla’s BHPH career began back in 1979 and his family-owned store sits in one of the most competitive markets in the country, according to NABD co-founder Ken Shilson, who assembled the panel and hosted the discussion in Orlando, Fla.

Rahmtulla recalled that back in 2012 his store was “making really good money,” but word came that large, well-capitalized competitors were coming to Houston, including DriveTime and J.D. Byrider.

“I sat down with my family and asked what we should do about it,” Rahmtulla told attendees. “They would be buying cars from the same places we would, and they would be selling to the same customers. We decided to do something different, and it was my idea. We got into European cars like BMW, Range Rover and Mercedes.”

It turned out to be an immense mistake that took Shahana Motors more than a year to overcome. While Rahmtulla was getting as much as $7,000 for down payments on these luxury vehicles, they soon ended up needing significant repairs. Work orders and delinquencies piled high. Rahmtulla’s capital provider learned what was happening and decided to end the banking relationship after several years of fruitful results.

Rahmtulla plowed money from his retirement fund into the dealership to keep things going. “It took a year to get it cleaned up,” he said.

After generating a meager profit in 2014, Shahana Motors produced healthier results in 2015. The dealership now keeps mostly domestic vehicles in inventory — units that can be acquired at auction for about $9,000 and retailed for $15,000, with about $700 in reconditioning that’s completed at the dealership’s own service department.

“We make sure those cars are in good shape. If the car isn’t running they’re not going to be making the payment. It’s now really working well for us,” Rahmtulla said.

Another best-practice panelist was Graham Lathrop of V.P. Auto Sales in Garland, Texas, a city near Dallas. Lathrop has been general manager for the past seven years of the family store that’s now in its second generation.

Before Rahmtulla shared his story, Lathrop described what works at his operation when it comes to filling inventory.

“Our main focus this year has been on our inventory, trying to put ourselves into a good opportunity with the car,” Lathrop said. “It’s an investment in the future.It’s very easy to think all cars are equal, but they’re not.

“We spent a lot of time and energy developing some analytics about what we can expect out of the vehicles. I think a lot of people try to cover up inventory mistakes or reconditioning mistakes with gross, and that’s just kicking the can down the road,” he continued.“You’re just going to have the same problem later. We’ve been guilty of that, too, so that’s been our prime focus in 2016.

“We’ve worked really hard to make sure we don’t mess up our decisions with bad reconditioning or some other problem in the service department,” Lathrop went on to say.

One of the newest operators included in NABD’s collection of dealers was Tahl Benit, who oversees Lake Erie Auto Credit, a BHPH business with two lots in Cleveland.Lake Erie Auto Credit has only been in operation for about three years, but Benit leveraged his nearly 20 years of dealership experience in an attempt to put Lake Erie Auto Credit into position for success.

While Lake Erie Auto Credit will obtain a few units from wholesalers or nearby franchised dealerships, Benit indicated much of the operation’s inventory comes from auctions with the availability of post-sale inspections being a primary reason why.

“I’ll come up with a short list of vehicles and then either one or two of my service individuals will go to the auction and check the cars out on the day prior. Then we try to purchase only those vehicles,” Benit said. “We do get a post-sale inspection on everything that is available.

“Based on those results, if they fail a post-sale inspection, we don’t buy them,” he added.

In the midst of the dialogue, Shilson chimed in with a thought that might apply to all BHPH operators.

“It’s no crime in making a mistake. What is a crime is to keep repeating it,” he said.

Read the full article at http://digital.subprimenews.com/article/How+Dealers+Overcome+Inventory+Mistakes/2640108/358326/article.html.

Ways DRN Data Can Augment Operators’ GPS Usage

Nick Zulovich, Senior Editor

FORT WORTH, Texas — Buy-here, pay-here dealers using GPS devices to track their vehicles isn’t a new development. Several of the industry’s largest GPS providers are seeing widespread usage of the devices that can help when collection efforts deteriorate to the point where a repossession might be necessary.

Meanwhile, Digital Recognition Network is looking to grab a stronger toehold in the BHPH space not as a GPS replacement, but rather as a data provider to augment information the device might already provide to boost an important metric — recoveries.

DRN vice president of financial services Jeremiah Wheeler explained to BHPH Report what the company is looking to bring to all sizes of operators, whether they have 50 units “out on the street,” or 500 or 5,000. Wheeler indicated that DRN’s network captures about 140 million license plate scans each month with its license-plate recognition technology. He’s confident that DRN has scanned many, if not most, of the vehicles in a BHPH dealership’s related finance company portfolio.

“What we’ve typically seen with buyhere, pay-here dealers using GPS devices is about 40 percent of the GPS devices are not working or giving inaccurate information,” Wheeler said. “Some (BHPH dealers) don’t even use them at all so they don’t have access to that data.

“That’s where we start when talking about augmenting other data sets and other skip-tracing tools. We step in and say, ‘Let’s start with the stuff you can’t find through traditional means and methods.Then let’s work our way back into the cycle,’” Wheeler continued.

“Once we on-board a client, they can use our data — even on the units that already have GPS — to make sure it is accurate and to make sure there are no other locations where they might be seeing the car where they're not getting pings off the GPS," he went on to say.

While BHPH operators might stipulate in their contracts that disabling a GPS device can trigger an immediate repossession, Wheeler insisted there are some customers who simply ignore that detail.

"Overall, it's really about being another data set in their shop that they can use to find people when they disable their GPS devices.You can pay a few hundred dollars and have a mechanic come to your house and just disable or take out the GPS that dealerships have put in," Wheeler said.

"It can be pretty easy to get around them, versus our data is a little harder to get around as long as you're parking your car somewhere and we pass by you. That's what we can capture," he added.

While perhaps a customer can tamper with a GPS device, Wheeler stressed that the VIN and license plate likely cannot be modified.

For several months, DRN has been giving BHPH operators the chance to submit some VINs from their portfolio to get a snapshot of what information the company can provide, especially if the dealership is trying to regain contact with the customer in hopes of getting payments back on track.

"There are options for a dealer. Try before you buy is an analysis of current portfolio and delinquency. Instead of providing actual data back, we can give a summary data, how many times we've seen all of the vehicles in their portfolio, across certain date patterns, what their collectability might be," Wheeler said.

"We give them a snapshot of what we call a hit analysis so we can determine what value we can bring to the dealer," he went on to say.

DRN already has some of the largest auto finance companies as clients. Now the company is looking to bring on more BHPH dealers. Wheeler highlighted that some operators have seen as much as a 20-percent improvement in their recovery amount simply by combining GPS information with DRN's data.

"We try to measure success with all our dealers who are using the system," he said."We try to have as many conversations as we can. It's up to them to tell us when they've been successful using the data. Overall, everyone who is using it seems to be really happy with it."

Read the full article at http://digital.subprimenews.com/article/Ways+DRN+Data+Can+Augment+Operators%E2%80%99+GPS+Usage/2640113/358326/article.html.

Best Of BHPH

Many buy-here, pay-here operators are straightforward businesspeople who have little time to dillydally when it comes to running their dealerships. It’s why we created this listing titled simply as the “Best of BHPH.” Contained in this issue is a comprehensive collection of important service providers and other support organizations and entities that can help operators of all sizes and locations. Some of the ones included in the “Best of BHPH” have been in business for decades and are well known. Others are start-ups that already have carved out an important place in the industry. No matter, the “Best of BHPH” is aimed at being a resource for buy-here, pay-here operators to leverage along with some expert perspective on how 2016 unfolded and what might be ahead.

Allies in your quest to be the best

Forgive me for preaching to the choir for a moment. But consider the potentially unfavorable perception some consumers — and a fair amount of lawmakers and regulators for that matter — have of the buy-here, pay-here dealership.How often are you fighting against the stigma that you sell overpriced junk cars at a business less sophisticated than children trying to drum up a couple of dollars while peddling lemonade during the family yard sale?

But you and I know better, right? You're more than just a dealer. You're involved in local workforce development because of the transportation options your store makes available. You're a credit counselor, too, because if your customers make timely payments, they can be on the path possibly to a prime Beacon score.

As much as it might seem like you — the buy-here, pay-here operator who hears all kinds of stories during the underwriting and collection processes — exist on an island potentially working against larger dealerships with flashy showrooms and more capital than they can spend, the listing included here in the "Best of BHPH" contains a rundown of potential allies. Some offer technology to make your records accurate and compliant. Others serve up ways to find more customers, while some can provide more financial resources or just someone who has "been there, done that" and can share some constructive feedback.

It's all up to you which part of the "Best of BHPH" can help your store. But know one thing — members of the "Best of BHPH" know you're nothing like the misconception and want to help make the industry better for all involved.

— Nick Zulovich, Senior Editor

Read the full article at http://digital.subprimenews.com/article/Best+Of+BHPH/2640175/358326/article.html.

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