view newsletter online August 15, 2024

One question I often here is, “What does the Association do for me?” I’m sure you have asked yourself that question, and I’m glad you asked. There are so many ways the Association is working behind the scenes to improve your opportunity to be successful that we could go through it for hours.

As with any endeavor, there is strength in numbers. With more numbers, there is more strength and clout. Our biannual legislative session begins in January and our influence and efforts keep legislation that is harmful to our industry from going through with no resistance. We send board members to Helena on your behalf to lobby for laws that are beneficial and oppose laws that can hurt us. We scan the docket daily looking for items that may affect you.

We are involved in the education of yours and your employees’ children by giving scholarships to deserving students. We have donated to Project Hope in the name of Independent Auto Dealer’s Association on your behalf and have put ourselves in front of bank presidents and other influential parties to explain the difference between a used car lot with no consideration for the community and our members that are dedicated to improving the independent dealer’s community.

We also have hours upon hours training available at any time and host our annual convention where you can learn from industry experts.

We send out monthly publications that include tips and legislative articles that keep you abreast of current and pending laws that will affect the car business on a national scale. There are 20 groups for retail and buy here pay here dealers and so much more.

 

The case on the CARS Rule could be headed to court for arguments in October.

Last week, the U.S. Court of Appeals Fifth Circuit set a tentative date for the oral arguments in the lawsuit filed by the NADA and Texas ADA against the Federal Trade Commission on the Combatting Auto Retail Scams rule for Oct. 7, 2024.

A stay on the regulation remains in place as it works through the court. The FTC issued the stay after the NADA and TADA filed its lawsuit.

NIADA and Texas IADA have joined the effort to stop the Federal Trade Commission from enforcing the vehicle shopping rule. NIADA and TIADA filed an amicus brief to the NADA and Texas ADA lawsuit in the Fifth Circuit, asking for the rule to be vacated. The filing pointed to the harmful impacts on dealerships and consumers if the rule is put in place.

Consumers will see vehicle price increases due to the additional requirements for disclosures and recordkeeping. They will also be faced with a more time-consuming and confusing sales experience.  Dealers will have to maneuver through many requisites, including providing an offering price and monthly payments in any discussion of a vehicle.

Consumers, who already have limited options, may find it impossible to secure financing as banks and third-party creditors reduce the funding to dealers lacking the resources to meet the requirements of the rule.

More than 80 percent of NIADA dealer members who employ less than 10 employees will be faced with considerable costs from the rule. Costs involve professional fees from attorneys and IT personnel, as well as record-keeping storage. Dealers may also see a decline in sales due to the extended sales process with the added disclosures and repetition of underwriting procedures for every vehicle inquiry.

The increased time spent covering the disclosure requirements could also limit the amount of customers sales personnel may serve, impacting compensation and the overall performance of the dealership.

The rule’s ramifications could lead to the closure of many small dealerships due to a decrease in revenue and credit tightening. The loss of potentially thousands of dealerships will create ripple effects throughout the economy and in communities of all sizes.

 

By Ben Goodman

Securing necessary capital is a fundamental challenge for buy-here pay-here dealerships. BHPH dealerships operate a unique business model that requires significant upfront investment and carries inherent risks.

Unlike traditional dealerships, BHPH businesses provide in-house financing to customers with poor or no credit, which means they must have a substantial amount of capital available to finance sales. According to a recent industry report, more than 60 percent of BHPH dealerships cite capital constraints as their biggest obstacle to growth.

As someone who has spent years in the trenches of dealership financing, I understand firsthand the challenges that BHPH dealerships face in securing capital. Because capital is crucial for growth and day-to-day operations, here are some strategies that have helped numerous dealerships like yours not only survive but thrive in a competitive market.

Understanding Your Capital Needs

The first step in securing funding is understanding your capital needs. A thorough financial assessment involves several critical steps:

Examine current cash flow: Assess your current cash flow, debts, and overall financial health to identify areas for improvement. For example, if your cash flow is insufficient to cover upcoming expenses, you may need short-term financing.

Calculate funds for specific goals: Determine the funds required for specific goals like purchasing inventory, upgrading facilities, or launching marketing campaigns. Create a budget outlining exactly how much capital you will need and where it will be allocated.

Focus on high-impact areas: Invest in areas that will drive growth and profitability. For instance, buying a popular car model with high demand and good profit margins can boost sales and revenue. Prioritize investments that offer the best return and avoid spreading your resources too thin.

Preparing for Financing

Preparation involves more than just gathering documents. There are several critical steps to ensure you're ready to secure the funding you need:

Business plan: A comprehensive business plan is essential. It should outline your business goals, market analysis, financial projections and strategies. A well-crafted plan convinces lenders and investors of your business potential and serves as a roadmap for growth. Include sections on your target market, competitive landscape, marketing strategy and operational plan. Support your claims with data and research.

Credit score: Improving your credit score is an ongoing process. Besides paying off debts and making timely payments, regularly check your credit report for errors and dispute inaccuracies. Consider working with a financial advisor or credit repair service if your score is low. A good credit score opens doors to better financing options and lower interest rates.

Documentation: Prepare necessary documentation well in advance, including financial statements, tax returns, business licenses and any other relevant documents. Organize these documents professionally and make them easy to navigate. This shows lenders and investors you are serious about your business.

Presenting your case: Effectively presenting your business case involves more than listing your strengths. Address potential risks directly and explain how you plan to mitigate them. Use visuals like charts and graphs to make your financial data more accessible and compelling. Practice your pitch with a mentor or advisor to refine your presentation skills and anticipate tough questions.

Conclusion

Securing the right capital is crucial for the growth and success of BHPH dealerships. Building strong relationships with lenders, presenting a compelling business case, and leveraging existing assets can significantly enhance your chances of securing the funding you need to drive your dealership's success. Start your financial assessment today, and take the first step towards finding the capital you need to grow your business.

I hope these insights help you navigate the complex world of financing for your BHPH dealership. Remember, it's all about finding the right fit for your specific needs and situation. Good luck!