Advantages Of Selling Your Receivables v. Holding The Paper

August 2006, Auto Dealer Today - WebXclusive

by Harlene Doane - Also by this author

Why would you consider selling your hard earned BHPH notes? Is there any benefit to selling your notes? Billy Peskin of United Acceptance shared several dealer benefits with us regarding the sale of BHPH notes.
  1. It allows dealers to turn their money faster.
  2. It is a prudent way to solve capitalization issues.
  3. It allows a dealer to focus on selling vehicles not collecting payments.
  4. Reporting customer credit to the bureaus.

It allows dealers to turn their money faster.

The typical BHPH dealer sells a vehicle and waits years to collect his money. By selling the notes after they have seasoned for a few months, dealers receive a discounted amount of the original note and can reinvest it in more inventory.

It is a prudent way to solve capitalization issues.
Capitalization for what? Expanding your operation, investing in your facility, upgrading technology, or even buying out a partner. There are several times in the life cycle of a dealership when cash flow becomes an issue. It’s no different than selling any other asset you own.

It allows a dealer to focus on selling vehicles; not on collecting payments.

Oftentimes dealers are very good at selling, but lack the experience to collect their accounts effectively. Sometimes it is just a factor of growth, too many accounts to collect on for your staff. Companies like United Acceptance have more experience in collecting accounts, knowing what they can and can’t do legally in many states. Dealers selling their aged notes often see a better yield than if they collected the accounts, especially when you factor in the cost of man-power for collection efforts.

Reporting customer credit to the bureaus

Some dealers think this is a benefit; others would disagree. Regardless of which side of the fence you are on, it is a benefit for the customer so there is some value to the dealer that has the availability to provide this service to his best customers. For a small dealer reporting direct is just too much of a hassle. By selling your notes to a company that provides that service, you have an added customer benefit that your competition may not be able to provide.

What would a company like United review in evaluating your portfolio for sale?

  • Aging – Notes that are 90+ days are optimal, with a 36-month term remaining.
  • Sold at fair price with legal interest rates
  • Value of the vehicle compared to the outstanding note is reasonable

Notes are evaluated on a deal-by-deal basis. Dealers tend to be very skeptical the first time through the process, but once they have completed one cycle they are very likely to do it again and again.

Vol 2, Issue 10

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