|Donnie Cochran, owner of Bayou Auto Sales in New Iberia, La., thrives in the used car business, but he doesn’t run his business like a traditional used vehicle operation any more. He rents vehicles to customers with the option to purchase once the vehicle is paid off. The practice is similar the buy here pay here (BHPH) business model, but the rent-to-own (RTO) model has big advantages over BHPH.|
Bayou Auto Sales opened its doors in 1992 as a traditional used car lot, but when the tragedy of 9/11 occurred, the industry took a hit. Struggling in a soft used car market, Cochran knew his business needed to change. He said, “I just took a step back and said, ‘If I’m going to stay in this business, I’m going to have to do something different’… I wanted to start financing my own cars, so I didn’t have to be dependant on the banks and finance companies because they had tightened up so much after 9/11.” He certainly didn’t want to leave the industry, but he “realized that something else had to be done to be profitable.”
Shortly after this realization, Cochran spoke with a service provider representative who happened to have a brother that owned a successful independent dealership nearby. He soon arranged a visit to this thriving dealership and learned it practiced the RTO model. Cochran, who liked what he saw, met with Mike Garner, marketing director at Louisiana-based SEADRA (South East Auto Dealers Rental Association), to learn about the advantages of the RTO business model in the dealership. The only other company in the United States that offers the RTO business model to auto dealers is Northland Auto Enterprises, of Minnesota.
Just three short months after 9/11, Cochran implemented RTO at Bayou Auto Sales. While the RTO business model is similar to that of BHPH dealers, there are significant differences.
Avoid Bankruptcy Problems
Recovery v. Repo
Grand Theft Auto
Cochran is pretty pleased with his customer base. He hasn’t had many problems with recovery and has only has to report a few vehicles stolen in the past six years. He has a lot of faith in his underwriter and brother, Rod, who has been the GM at Bayou since 2001. Rod has been in the collections business since 1988, which offers priceless experience he now uses at Bayou Auto Sales in the underwriting and collections department.
Vol 5, Issue 8