|America lost one of our great entertainers in 2005. For over thirty years, Johnny Carson helped people laugh themselves to bed each night. Now as I am looking forward to 2006, attempting to predict what the year ahead will hold for the Buy Here Pay Here (BHPH) industry, I can’t help but picture one of my favorite characters from the Tonight Show with Johnny Carson, “Carnac the Magnificent.” You remember Carnac, right? Johnny would dress up in a giant turban, holding a “hermetically sealed envelope” to his forehead, from which he would telepathically divine the answer before opening the envelope to reveal the question. It went kind of like this:|
CARNAC (holding the envelope to his head): “Goodyear…Tuck…and Bill Clinton.”
ED McMAHON: “GOODYEAR! TUCK! AND BILL CLINTON!”
CARNAC (glaring at Ed & opening the envelope to read the question): “Name a Tire, a Friar and a Liar.”
So in honor of Carnac’s passing, here are some fearless predictions of what we can expect in the year ahead:
1) More Dealers Entering the BHPH arena – And really, who can blame them? Why struggle to net one to two percent of Sales in a New Car operation when profits in a properly run BHPH can be 10 times that amount? As a matter of fact, a lot of the influx seems to be coming from the new car dealers. It is no secret, that while the risk is certainly greater in BHPH, there is far greater potential reward.
One of the big reasons new car dealers have traditionally shied away from entering the BHPH arena in the past has been a fear that the image of their dealership will suffer. However, since many of these same dealers have slowly embraced the Special Finance niche, they have come to the understanding that the overwhelming majority of the car-buying public has some credit blemishes on their record. Often, there is a natural progression to investigate BHPH once they realize that there are many good people out there who need assistance with financing in order to purchase a vehicle from them. That process, combined with the conscious efforts of many key dealers and industry leaders to improve the reputation of the BHPH industry, has led many new dealers to actively pursue opening a BHPH operation.
So how will these new dealers impact those already in the BHPH business? Well, I’m a believer that the cream will rise to the top. Even though there may be increased competition, there will always be a place for the best run BHPH dealerships. We simply need to ensure that our dealership is one of those Best dealerships! And NOW is the time to make sure that you have the best people possible, that they are properly trained and that you have the proper systems & policies in place to maintain and expand your success.
2) Increase in Internet Usage – The reliance on the Internet has been steadily increasing across the entire automotive spectrum for the past several years. For whatever reason, it appears the BHPH industry has been a little slower to catch hold of this giant opportunity. It seems that every reported statistic continues to show auto buyers across the board are turning to the Internet to do research prior to visiting a dealership. As the Internet becomes more convenient and accessible this trend will only continue. I encourage you to be proactive in establishing your identity online and making sure you are equipped to properly handle the flow of traffic you will receive from a properly designed Web site.
3) Recent Bankruptcy Filers Enter the BHPH Marketplace – Many of us were affected one way or another by the huge rush by people to file Bankruptcy prior to the October 17, 2005 deadline. There was an unprecedented surge in the number of people that filed in the weeks prior to the enactment date, and many of those bankruptcies should be reaching the discharge stage during the first quarter of 2006. With many lenders hesitant to finance a recently discharged customer, there will likely be a large vacuum created, which sharp BHPH dealers can eagerly fill. Already the traditionally best quarter of the year in BHPH, the first quarter of 2006 could be a record breaker in this industry, if the “perfect storm” of circumstances all come together as they appear to be lining up to do. There is only one question: Will you be ready?!
Well, I hear the Tonight Show band tuning up for the closing credits, so let me finish by wishing all of you much success in the year ahead. I must now go and put away the turban & hermetically sealed envelopes until next year!
Volume 3, Issue 1
Gemspring Capital has acquired Bobit Business Media, home of Agent Entrepreneur, Auto Dealer Today, F&I and Showroom, and P&A magazines.