The market for Buy Here Pay Here continues to grow year after year. A recent report from the credit bureaus estimates that 10% of all vehicles financed were done through BHPH dealers. The number continues to grow each year as the economy in many places struggles to keep up. Because of its growing popularity, more and more dealers are adding the in-house financing business model to sell cars. Some are even leaving traditional retail models altogether in favor of the in-house approach. So keep reading to learn how to start a Buy Here Pay Here dealership.

Here are 5 things you need to have when starting a Buy Here Pay Here dealership.

1. Dedication

Unlike a traditional retail model where a lender finances a vehicle and is responsible for the loan, in the BHPH business model you are responsible. This means you have to be prepared to deal with the risk involved with lending directly to consumers. BHPH financing means using your own money and trusting your customers.

Take the time to learn the ins and outs of in-house financing. We offer free consultation as well as paid training courses at DealerClick. There are also a lot of other resources to check out.

2. Capital

Normally, a buy here pay here vehicle ranges from $1,000 to $15,000. Depending on your plan of action, you may need a varying amount of capital to get started.

Keep in mind, you are loaning the vehicle to the consumer with no more than the guarantee of the first payment. You need to make sure that you have the resources to last until you can turn a profit.

For instance, if you sell an average of 12 cars a month that you bought at $3,000 and sold for $6,999 at 12% interest rate it would take an investment of 1 million dollars before you turn a profit.

Unless you have the money to invest yourself you’ll need to get financing to start your BHPH business. You can contact finance companies to get a business loan, use your own cash, or use another strategy for securing funding without underwriting guidelines. The initial investment will need to be figured out before you open your doors to buy here pay here clientele.

3. Clients

You need to make sure you are in an area that has the car buyers for BHPH. The average buyer is 35 years old and is working-class or working poor. It is made of people who may have fallen on hard times and can’t afford, or don’t have the credit score for a traditional auto loan. It also comprises of seniors living on a fixed income and young people who work at low pay jobs. These are generally people who just need a little help.

You just need to decide whether your area can support your buy here pay here dealership.

4. Staff

Your staff is very important because of the difficult circumstances your clients may be facing. There is a very personal element when you are helping someone get a vehicle when nobody else will. Your staff must treat your customers with dignity and respect so you can build rapport with the community. How you treat customers who are having a hard time is critical to a successful BHPH operation. Your BHPH dealership should be a strong part of the community.

Your staff needs to remember that more than 90% of your clients will be hard-working, decent people.

5. Stock

The last thing you need to be sure of is having the right inventory. The price range should up to $15,000. That’s a number that your clients can afford. And the last thing you want to have a BHPH lot full of vehicles your clients don’t want.

The main reason your clients need a vehicle is to get back and forth to work and run errands. There won’t be a large demand for luxury cars or very expensive SUV’s.

We hope you’ve enjoyed our article on how to start a Buy Here Pay Here dealership.

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