Embrace It or Risk Being Left Behind
Buy here pay here has become a very complex business. In addition to the numerous laws and regulations that BHPH dealers are required to comply with, technology has had a major impact on the competition of the industry. Whether you consider that impact to be positive or negative is largely determined by whether you embrace technology.
When someone mentions technology in the BHPH industry, many people think of starter-interrupt or GPS devices. The fact is that technology goes much wider and much deeper than that, and in recent years, technology has done a great deal to improve the accuracy and efficiency with which a BHPH business can be run.
Here are some of the advances in technology that have impacted five key areas of a BHPH business, specifically dealer management, inventory, underwriting, collections and asset recovery.
Probably the biggest single advancement in the BHPH business was the introduction of dealer management software (DMS). DMS has added significant functionality, accuracy and control over everything from customer data mining to automated printing of contracts and forms. Although the functionality of a DMS may vary between software providers, most of them have essential functions such as automated loan applications, integrated vehicle inventory and expense management, automated loan and payment calculators, automated credit bureau access, and automated OFAC checks. The key to selecting your DMS is to determine your current and future needs for operating your BHPH business.
Vehicle inventory usually represents the highest expense in operating a BHPH business. The technology associated with the DMS replaces the pen and paper accounting functions with automated expense management such as posting of reconditioning expenses directly to the vehicle inventory. Modules for paying vendors directly through your DMS can add a dimension of accuracy and efficiency to your operation.
Technology has also allowed dealers to be more creative and search farther afield for sourcing vehicle inventory through a growing number of online auctions and dealer inventory exchange websites. The Internet has also helped dealers advertise and promote their dealership and inventory for a fraction of the cost of traditional advertising. More and more dealers are embracing the newest technology available and are benefiting from repeat and referral business by utilizing social networking services such as Facebook, MySpace and Twitter.
Successful BHPH dealers have specific policies and procedures for deal structure and underwriting. Here again, technology has made underwriting more efficient with the introduction of loan-scoring programs that assist dealers with determining the degree of risk associated with a loan application. By quantifying the stability of the applicant and the degree of risk associated with the deal structure, the dealer is in a better position to make a loan decision based on facts, not just gut feel. Better data mining and tracking of loan performance has made static pool analysis more effective and provided better results in determining a BHPH portfolio’s long-term success rate.
Technology has made automated payment devices such as debit card machines and ACH payments possible. Many BHPH dealers are implementing an online payment feature on their websites as they upgrade and enhance the functionality of their websites. DMS providers have made customer data mining more effective, and many software systems have built-in form letters and notices to assist with contacting customers and managing collections. Clearly one of the biggest advances in technology has been the introduction of electronic payment reminders such as starter-interrupt devices. Technology such as social networking websites have even helped dealers improve skip tracing in some cases.
One of the single largest improvements in the BHPH industry in recent years has been the improved results seen in asset recovery. GPS devices have made finding and recovering vehicles significantly easier and faster. In addition, many GPS devices have a “geo-fence” that alerts a dealer when a delinquent customer the dealer is looking for either enters or leaves a specific mapped out area.
The bottom line is that technology is here to stay in the BHPH business, and it will continue to grow and evolve at a tremendous rate. Embrace technology, adapt to it and implement it into your BHPH business. Not only will you benefit from increased accuracy and efficiency, but you will be a more successful BHPH dealer because of it. Not embracing technology in this day and age will most certainly result in your business being left behind.
Vol. 8, Issue 6