Stay on the right path during turbulent time

Though the ride may be about to get a little bumpy, the path to a land of opportunity is straight ahead again for buy here, pay-here dealers.

But to stay on the right path and get through these turbulent times, dealers must keep an eye on their data and act accordingly said successful dealers Eddie Hale of Neighborhood Autos in Decatur, Texas, Jeff Baker of Car City in Michigan, Mark Jones of MCMC Auto in Fort Worth, Texas, and Chad Randash of Randash Auto in Billings, Mont., during a panel discussion at NIADA Accelerate 2023.

The best advice is to constantly be checking your numbers — expenses and revenues, delinquencies and capital lending rates. Some of the data may need to be checked weekly and others monthly.

“Some of these numbers tell you where you’ve been, some tell you where you are and others tell you where you’re going,” Hale said.

“I watch our business through trends of where we’ve been and where we are going. We can figure out real quick where we are at. But where are we going and how are we going to get there and still be able to pay our bills.”

To easily figure out why or why not you’re profitable, breakdown the total cost per account. This is more than looking at the price of the car and the reconditioning. It also includes payroll, collections and a breakdown other expenses. Hale calls it figuring out the true cost of selling a vehicle.

“All these are easily attainable going through your financials,” Hale said. “Those are the number that will give you a great reflection on why you’re profitable or why you’re not profitable.”

He added dealers need to use caution when just increasing the price of the car to balance the books.

“The payment pressure that you’re putting on your client and all the things that you may be looking for the client to take care of, you may have pushed them to the brim or to their threshold,” Hale said.

Another key consideration is the capital costs, which have increased with the interest rates.

Margins are much slimmer due to the increased cost of attaining capital to create loans. In some instances dealers are seeing their interest payments per month tripled.

Delinquencies are on the rise and so are repossessions for BHPH dealers.

See full story in the August issue of UCD.

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