In another preview of the annual industry benchmarks compiled by the National Alliance of Buy-Here, Pay-Here Dealers, Ken Shilson touched on three more highlights from the “most comprehensive report we have ever published on subprime auto finance,” covering activity through the end of 2016 as well as forward-looking commentary and comparisons with prior years.
Shilson, the NABD president and founder, explained not only how the comprehensive report, now in its 19th consecutive year, contains 20 group operating information from both NCM Associates and the National Independent Automobile Dealers Association, but also how the timing is crucial, too.
“Our benchmarks report comes at an important time when competition for the best subprime customers from independent finance companies, franchise operators, credit unions and others who are seeking higher yields in the low-yielding environment of today has been significant,” Shilson said about the information that also includes financial results and ratios from SGC Certified Public Accountants and loss metrics prepared by Subprime Analytics.
“Although BHPH industry profitability for independent operators was depressed in 2016 by this competition, better days are ahead for independent operators who embrace the changes necessary to succeed today,” Shilson continued.
Some important highlights about the 2016 benchmarks include:
1. Bad debts increased from higher amounts financed (severity), from competitive pressures which depressed down payments and repayments, and increases in the allowance for bad debts in anticipation of a new credit loss measurement standard passed by the American Institute of CPAs last June.
2. Operations income was reduced by higher operating expenses, which were impacted by additional compliance costs and inflation, bad debts and an increased cost of vehicles.
3. Recovery income was reduced by lower yields from the liquidation of repos.
Shilson pointed out that many independent operators chose not to match aggressive underwriting competition, which included longer terms and higher cost, newer model vehicles sold and financing to deep subprime customers.
“Better days are ahead for operators who are positioned to capitalize on opportunities created by underwriting mistakes made by others,” Shilson said.
“However, operators must be proactive in order to regain their lost market share. This requires them to learn and implement new operating practices, technology and to learn from the mistakes made by competitors and not repeat them,” he continued.
All of the benchmarks will be revealed during NABD’s 19th annual conference at Wynn/Encore in Las Vegas on May 23 to 25. The conference theme is “The Changing World of BHPH,” which features more than 65 speakers/experts during this three-day event.
Shilson will discuss the entire benchmark report with NIADA 20 group director Chuck Bonanno.
“The old ways are not working like they have in the past so the BHPH industry must adjust to the new challenges caused by the increased competition,” Shilson said. “The adjustments start by understanding the market changes and by comparing your own performance with your peers.
“This benchmark report will facilitate doing both,” he added.
This year’s conference also includes 12 interactive workshops that will be covering:
—An accounting/tax update
—Compliance hot topics
—A current developments update
—Getting your best customers back
—Reconditioning best practices
—Keeping customers paying and increasing recoveries
—Sourcing and financing the right inventory
—Technology solutions for GPS
All of the educational sessions will be at Encore this year, which was recently renovated and won the Travelers Magazine award as the finest hotel in Las Vegas. All the Encore rooms are suites and NABD secured $209 discounted room rates with no resort fees while supplies last.
Shilson emphasized the prices for accommodations “make this fabulous facility affordable to everyone.”
Attendees may register online at or by calling (832) 767-4759.
“Copies of the benchmarks report will be distributed to attendees of the conference and advanced copies will be made available only to those who register for this important event,” Shilson said. “Operators can’t continue to do the same things and expect better results. It’s time to adopt some new operating practices.”