These days, there exists more than one type of car dealer. Before, dealers only existed to either sell new or used cars. However, the Buy Here Pay Here (BHPH) dealer has become increasingly popular in recent years.
BHPH dealers allow their customers to purchase a car and then make payments on it at the dealership. In other words, the dealership serves as the customer’s bank. However, this type of dealership can be risky because customers with bad credit are often the ones that turn to them.
If you’re thinking about becoming a BHPH dealer, there are certain things you need to keep in mind. Here are some dos and don’ts of BHPH dealerships.
Do Follow State Laws
It is not enough that you managed to secure the necessary permit to sell cars in your state. Remember that each state has its own laws governing the sale of used vehicles. For example, some states require dealers to sell all used cars with a warranty, while others may not. Be sure to familiarize yourself with your state’s laws so you can stay compliant.
There are also laws governing how you can advertise your dealership. Some states, for instance, do not allow BHPH dealerships to advertise using the word “credit” or “finance.” So again, ensure you know what you can and cannot do in advertising.
Instead, you can focus on advertising the vehicles you have for sale. You can also put up signs that say “We Finance” or “Buy Here Pay Here” to let customers know that you offer in-house financing.
Don’t Disregard the Importance of a Website
Most consumers now leverage the internet to find car dealers. If they can’t find you online and you don’t have a professional website to advertise your business, you are already missing out on many potential customers.
Your website doesn’t have to be too fancy or complicated. Make sure it contains all the essential information about your dealership, such as your location, contact details, and the types of vehicles you sell. You can also use your website to post photos and videos of the cars you have for sale.
Reports show that three out of four mobile users use their mobile to search for things they need immediately. By optimizing your website for mobile users, you can further increase your chances of targeting your consumers online.
Do Use Technology to Your Advantage
There’s no denying that technology has changed the way dealerships operate. Many BHPH dealers are now using software to streamline their operations, making it easier for customers to apply for financing and make payments.
One such software is called an auto loan origination system (ALOS). This software allows customers to apply for financing and make payments online. It also allows dealers to track their inventory, create reports, and manage customer accounts.
Another valuable piece of technology for BHPH dealers is a GPS tracking system. You can use this to track the location of vehicles you sell and monitor payments. This new starter interrupt technology allows BHPH dealers to take complete control of their customer communications and vehicle control.
Special GPS comes with car disable device technology and two-way messaging that you can use to contact customers, send reminders, and even disable a vehicle remotely if needed. With this technology, you can rest assured that you are in full control of your dealership’s operation.
The key is investing in the right technology and only buying from reputable suppliers. Let’s say you are after a starter interrupt technology. You must do your research so you can find reputable buyers selling this very tech for BHPH dealers like you. By investing your trust in trustworthy suppliers, you can have better peace of mind knowing that you are using quality products that will not give you any headaches in the future.
Do Screen Your Customers Carefully
Since your business model can attract many high-risk customers, you must screen them carefully. This way, you can avoid selling to customers who are likely to default on their payments.
To screen your customers, you will need to collect information from them, such as their employment history, income, and credit score. You can also require them to provide a down payment. The higher the down payment, the lower the risk of default.
You should also check their references, such as family and friends. This will give you an idea of what kind of person they are and whether they will likely default on their payments.
Lastly, run a background check. This will allow you to determine if the customer has any criminal history. If they do, then it’s likely that they will not be able to make their payments on time.
Don’t Sell Lemon Cars
Lemon cars refer to vehicles that have a lot of defects and problems. Dealers usually offer this at a very low price and can be challenging to sell. This is because most people are not willing to buy a car that has a lot of problems that can also put their safety at risk.
Selling lemon cars can damage your reputation. Buyers who unknowingly bought lemon cars from you leave bad reviews online, which can prevent other clients from trusting your business. They might think that all of your vehicles have the same problem as the lemon car they bought from you.
Lemon car buyers can sue you. In some cases, they might win the case and get compensated for the inconvenience you caused them. If this happens, it will not only cost you money but will also damage your reputation even further.
To avoid selling lemon cars, inspect the vehicles thoroughly before putting them up for sale. If you find any defects, fix them immediately. It’s also a good idea to get a vehicle history report so you can check for any previous accidents or problems.
Being a BHPH dealer comes with a lot of responsibility. But as long as you follow these simple dos and don’ts, you should be able to stay on the right side of the law and run your business successfully. Do your research, play it safe, and always disclose any known issues with the cars you’re selling—and you should be just fine!