BHPH Dealers Improve the Basics in 2009 for Better Cash Management

February 2010, Auto Dealer Today - WebXclusive

by Brent Carmichael - Also by this author


The main focus for BHPH dealers in the NCM BHPH 20 Groups program for 2009 was cash management. They looked to maximize cash flow to fund growth and/or reduce reliance on borrowed capital.

Dealers who were successful did this in two ways:

1. Lowering risk

2. Reducing expenses

To lower risk, they used better deal structures to maintain their cash-in-deal (exposure) with increased down payments (up $200), while keeping terms virtually the same. Even though the cost of inventory rose slightly, they were able to maintain, or even reduce, the break-even time on each deal. Better underwriting and collection practices added to this as well. Collection dollars rose 2.5 percent over last year, and credit losses fell 1 percent from this time last year. Better deal structure plus better underwriting and collection practices equals more cash and lower overall risk.

Rightsizing staff and overall expense audits were the keys to the reduced spending. Dealers were in tune with economic conditions and quickly moved to control these areas. Total expense per unit dropped by a little over 10 percent, even though the cost of inventory rose almost 10 percent. This helped to produce a 30 percent increase in per-unit profit over the previous year.

Key Benchmarks (75th Percentile) from NCM BHPH 20 Groups:

Down Payment:                            $1,313     (up 11%)
Company Expense Per Unit:        $2,453     (down 11%)
Recon Per Unit:                            $601        (no change)
Net Profit Per Unit:                       $2,092     (up 30%)
Cash In Deal (per deal):               $4,973     (up 8%)
Charge Off % A/R Annualized:     17.6%      (down 1%)
Avg. Mo. $$ Collected as % A/R:  7.9%       (up 1.4% & up 2.5% annualized)
Finance Term:                              133 weeks   (no change)
Monthly Payment:                        $360         (no change)
Total Company Debt as % A/R:   42.1%       (down 1%)

All data courtesy of NCM Associates, Inc. and Brent Carmichael, BHPH 20 Group Moderator.

Vol. 6, Issue 12

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