BANDON, Ore. — According to CNW Research's Art Spinella, tough economic times are dramatically driving up the growth of buy-here, pay-here lots throughout the country.

"Back in the day, such operations were typically small, dusty outlets with marginal vehicles where a customer returned each week to make a payment. The dealer provided minimal transportation at somewhat inflated prices that generated a profit at least as large as the original price of the car or truck," Spinella explained.

"That's changed. Today, fully a third of the BHPH lots are offering vehicles that sell for $8,000 or more, according to a CNW study of available current and past data from states, insurance companies and the used-car industry," he continued.

In 2000, of the 41.6 million used vehicles sold, 29.7 million were sold via both franchised and independent dealers. About 4.4 percent were BHPH cars, representing about 1.32 million.

"The unit figure remained fairly constant over the intervening nine years until the new-car business collapsed sending franchised dealers into a ‘BHPH frenzy,'" Spinella suggested.

"In CY 2009, more than 1.8 million BHPH cars and trucks were sold and the 2010 projections (based on the first-quarter data) could see BHPH top 2.3 million units with a value of nearly $14 billion on an average retail price of approximately $6,000," he forecasted.

Playing a big factor in the BHPH growth is the tightening up of lending requirements at various financial institutions.

"Many BHPH sales are to consumers who might have qualified for a conventional auto loan three years ago when financial institutions were generally playing loose with approvals," Spinella pointed out. "Tighter credit requirements and a skittish banking industry sent marginal customers needing a vehicle to BHPH lots.

"Many dealers became believers in BHPH because of the high-gross profit margins ranging from 32 percent for franchised dealers' operation to as high as 43 percent for independents. As credit loosens, BHPH sales may well decline somewhat, but remain both significant and profitable," he concluded.