Earlier in the year, I was hearing how the weather was slowing things down, but everyone was doing some business around the ice and snow. This was a tough winter in most of the country. When the tax money started moving, even “Old Man Winter” didn’t slow down the sales. I got requests from a few dealers asking if I knew where they could buy some cars. Of course, everyone I know that buys cars for a living was asking the same question.
This information has added validity to the fact that special finance has begun to pull back. I spoke with some franchised dealers and heard that what they were getting financed last year isn’t getting financed now at the same level. Combine that with the fact that we know our buy-here, pay-here customers, many that purchased a new or very late-model used at the franchise store, will not be able to maintain that loan for a long time, and you have a strong market coming back for the BHPH dealers.
From my discussions I also heard another resounding commonality: Dealers were setting records on collections. With the slowdown from the last two years and the fact so many dealers were collecting at record paces, tells me everyone should be recovered and back at full strength.
So what now?
One thing to remember is that February is generally one of the worst static pools you have in your portfolio. I hope everyone kept their underwriting in line and didn’t get blinded by big down payments. Watch the business you did the last 60 or so days as you go into the summer, and make sure your losses do not eclipse the great sales figures you just had.
For me tax season was a time to gather in all the money we could in payments and downs, but I usually tightened up underwriting a little, and I would have a first quarter that represented about 30 percent of my year’s sales. I immediately began loading up for the third quarter, where I would generally have almost the same number of sales.
At least down South, summers are hard on the older vehicles. You know — radiators popping, air conditioners failing and head gaskets going. This all leads to people that are ready to trade by mid-July. Add to that school starting and you have a good reason to stock up and market that it is time to trade or get mama a newer car so little Johnny can drive her old rig to school.
We would always have a huge 30-dayperiod between July 15 and Aug. 15. I would plan for it and market that we offered a maintenance ready vehicle with a real service contract that will keep the car running and cool during the hot summer months, which lasts until October in my old neck of the woods.
Another thing we would do is go after all our customers that owed less than $2,500 on their loans and try to bring them in to trade. We would offer them a great trade allowance and small down payment to move into another vehicle. This way we could pile up some decent trades to have for sale either by cash only or very short terms like 90 to 180 days. This would always make September a good month for us. Little Johnny needs something for school, and there will be many people out looking for a vehicle they can buy cheap with liability insurance only.
More Planning Recommendations
By the time you have gotten deep into September, I hope you are planning on sitting down and taking a hard look at next year.
Evaluate all your personnel. Take a look at your metrics very closely, and see how your portfolio is performing. How did your early tax credits for down payment work out? What vehicles got old on you Even though you were rocking and having a great tax season? Did you hold on to cars that were really too high mile or not truly in good shape hoping to have them make another loan? Evaluate all your losses over the last year.
Really look at each one and see why it didn’t pay out. Ask questions of each person involved, and find out why that loss occurred, and take some steps in your processes to help prevent the same scenario from repeating where you can.
Every year you should be going through these exercises and making sure your operation is running at peak performance. Yes, you can just keep doing what you’re doing and make money, but if you spend some quality time questioning every aspect of your operation each year you will be fine tuning your bottom line, and you will also be showing your people that being efficient is important and have them practicing better habits year around. This way when next fall comes your associates will know it is review time, and hopefully, they have been working all year to prevent having bad reviews.
By the time tax season has ended, the conferences have begun. If you can, go to at least one of the BHPH conferences and maybe the conference hosted by the National Independent Automobile Dealers Association. You will see and hear all the latest offerings from vendors, compliance and what other dealers around the country are doing and experiencing.
You should search out and join a 20 Group also. Being in a 20 Group will accomplish everything I have talked about and really help your operation be the best it can be.
Tax season is a great time to pull in a lot of cash and get your portfolio back up to the level you want it to be. It can also be a time to put a lot of bad business on the books while you are trying to get that cash.
Balance out the two and work to have a more even flow of business, which will be more successful for your bottom line. Selling 40 percent of your vehicles in the first quarter is great as long as you do not see 40 percent or higher loss rate on those loans.
Summer is coming and it has always been a great time for selling more vehicles, at least in my experience. Plan some promotions for after July 15. I suggest you plan and market into the hot weather and getting some school cars to cash out by September. Then evaluate the year and make some meaningful changes so 2015 will be even stronger.
Gene Daughtry is an experienced trainer and consultant specializing in BHPH/LHPH dealership operations. Daughtry now is director of BHPH operations for PLS Financial and has begun a multistate project of building new BHPH dealerships in several states. He has 17 years of BHPH experience. Follow Gene Daughtry on LinkedIn, go to his website www.dealers411.net, email him at [email protected] dealers411.net or call (479) 970-4049 if you have questions.