Here we are — the holidays are upon us.  As usual, the IRS is warning of a delay in tax refunds. Everyone is stocking up on inventory, hoping for a grand tax season. Customers are not making preparations to deal with the holidays. Special finance operations are still interfering with BHPH sales. 

So what are you doing to combat the issues we face closing out 2014, and be ready for a strong 2015?

The holidays are similar to the IRS. You cannot do much about their effects on the business. I have tried holiday contests, hoping to create some awareness and urgency with customers concerning the holidays.

I have read about dealers that actually defer everyone’s December payments by adding a little to the other month’s payments so the dealership could maintain cash flows in their portfolios. I have seen dealers offer a drawing of huge prizes to all customers that maintained their accounts up to the week of Christmas.

Some dealers even offer to pay off one lucky customer’s loan, if they draw their name.  The more on-time payments made during the contest period, the more chances each customer had to win.

Does this help improve collections during this time of year? Most dealers report that they see a small percentage of effect. 

In my experience, and others I have spoken with, it seems that your good customers win the prizes, and the usual suspects you deal with remain on the delinquent list acting as if Christmas was a surprise (again).

I generally send out a letter to all our regularly delinquent customers around Thanksgiving reminding them that the holidays are approaching, and they really should keep our payments in mind. There are so many customers that cannot help but live check to check and with shorter hours, forced time off and the extra expenses the holidays bring, it is no wonder they stay behind. We just remind them of the need to have a dependable car, especially with cold weather and family trips to grandma’s house. For these customers, the holidays are stressful enough, and we let them know that if they can work with us to keep up with their car payments it will be much less to worry about, and we won’t need to bother them when they should be enjoying their families.

Touching on Tax Season

Now, on to the IRS. Yes, they have already posted a warning about delayed tax returns due to possible Congressional action, or lack thereof. I believe I have heard this several years in a row.

Two years ago was the first I remember where the delay actually affected everyone. I have always planned on an uptick in sales during the season, but I usually tighten up underwriting slightly and work to get tax dollars in for delinquent accounts and cheap cash cars.

The tax season (first quarter) was about 30 percent of the year’s business for me. I know of dealers that will sell about 40 percent or more of their annual total during this time.

Of course, those guys are generally repossessing huge numbers of vehicles in April, May and June. I generally did not have much of a change in my loss numbers during the year.

Which business model is better is completely up to you. If the IRS delays refunds, it shouldn’t be a killer for you if you do not plan on half your business coming from tax season.

What should happen in the first quarter is your operation seeing the best cash flow period all year with your portfolio looking great. We pushed to get current accounts beyond 90 percent and “recency” in the mid-90s with collection potential pushing 115 percent.

Moving Older Units

The tax season is a great time for everyone in your store to make extra money with the added volume and downs. We would get rid of every “old unit” we had in stock utilizing good spiffs. We planned to end up with a light but well-blended inventory so as we head into May we are buying what we want and not missing business over inventory choices.

Another opportunity we generally took advantage of would be selling cash cars below $3,500. The average refund for our customer is more than $4,000, and many of them look for something they can buy in cash for a child or an extra car.

We always try to keep those vehicles around (10- to 15-year-old smaller rigs that are a bit higher on miles but still drive out OK). But we will stock up on them for tax season.

If we can get the vehicles we like for under $1,000 and sell them for $2,500 to $3,500, it is worth it.

Special Finance Impact

Now what about special financing or deep subprime lending?

Several months ago, I was saying that the special finance influence will have begun slowing up by the fourth quarter. It started a little earlier than that but hasn’t slowed as much as I thought, yet.

I have read some articles that indicate delinquencies are climbing for the lenders, and in talking with some franchise dealers, I continue to hear that special finance loans are not as robust a part of their sales as this time last year.

As in the past, I believe that special finance will fall back and some franchise dealers will eventually abandon their special finance departments. With lenders having tightened up underwriting, there should be a better balance between subprime and deep subprime, allowing BHPH to have a great year in 2015.

Tapping Previous Customers

With more inventory becoming available and prices getting better for the inventory we need, all BHPH dealers should be able to generate the revenues they would like in the coming months.

I suggest to dealers they should begin marketing to the customers that are giving up those huge payment vehicles they purchased during the last two to three years and come back to you, their BHPH dealer, who will give them better service and always be there to help them.

In your market and within your advertising scheme, you need to make that message fit you, but I think it is time to make sure the customers you lost to special financing understand they can come back to you for another vehicle.

Resolution for 2015

One other thing. If you haven’t already, make it your New Year’s resolution to embrace the Consumer Financial Protection Bureau and get a compliance management program setup in your operation.

Yes, the CFPB is overbearing, confusing the market and making doing business more difficult and expensive. I know the CFPB isn’t taking into consideration what the customer brings to the party when we are trying to do business with them and help them succeed.

But we are not going to change that anytime soon.

A few of your peers and the “not so recent history” of our industry has created perceptions that have been hard to shake. Embrace what you need to do, including:

  • Write out procedures and policies for every aspect of your operation.
  • Within those policies and procedures include proper compliance steps that protect privacy and identity.
  • Establish and practice a complaint management system that is monitored and any complaints you receive are dealt with swiftly and properly.
  • Make sure everyone in your store understands the importance of your company’s responsibilities in compliance today and arrange training for it.

I have spent a good part of this year putting together another operation (startup) for a company that had no previous experience in BHPH. I have to say the old Latin principle Docendo discimus — "by teaching, we learn" is very true.

What I have learned this go around is that policies and procedures for every aspect of your operation being written out are critical to your success if you were to find yourself on the radar with the regulatory entities in your market.

Also there are many ways to achieve the result desired, so always have an open mind to different methods.

Have a wonderful holiday season, do something to help others and let’s make 2015 the best year ever,

Gene Daughtry is an experienced trainer and consultant specializing in BHPH/LHPH dealership operations. Daughtry now is director of BHPH operations for PLS Financial and has begun a multistate project of building new BHPH dealerships in several states. He has 17 years of BHPH experience. If you would like a “how to manual” on starting up and operating a BHPH dealership check out and get a copy of his book, BHPH 101 Plus. You can reach Daughtry at or (479) 970-4049.