Franchised Activity Pushes BHPH Market Share

SCHAUMBURG, Ill. — Buy-here, pay-here penetration in used-vehicle financing continues to be on the rise, according to third-quarter data assembled by Experian Automotive.

Experian discovered the BHPH market share climbed 10.5 percent year-over-year to 14.26 percent of all used-vehicle financing in the third quarter. Melinda Zabritski, director of automotive credit for Experian Automotive, explained during a Webinar last week that the BHPH's market penetration has steadily risen for nearly two years.

Beyond consumer need, why is BHPH on an upward track?

"I know we're seeing an increase in buy-here, pay-here financing in the franchise dealer market. I think we'll continue to see that part of the sector increase," Zabritski responded.

"I think dealers are looking at it as a profitable area," she continued. "Some might have gotten scared off by the market crash back in 2009 and the resulting pullback. By having their own financing, they're able to fill in any gaps if there are shifts in the marketplace."

A year ago, Experian determined BHPH encompassed a little more than 13 percent of the market.

"I wouldn't be surprised to see that continue to inch up toward 15, 16 percent during the next two years," Zabritski projected.

As Zabritski noted, if franchised dealers are delving deeper into the BHPH space, it's likely reflecting on how much overall financing fell under the franchised dealer umbrella during the third quarter and how much came within independent stores.

Zabritski pointed out independent stores "lost momentum" during the third quarter since their share of the overall auto finance pie slid to 28.94 percent. As a result, franchised dealers constituted the remaining 71.06 percent.

Experian's past data showed independents' market share often settled at about 30 to 32 percent, but Zabritski said that level has softened during the last couple of quarters.

One other data point that's possibly connected to the BHPH space — Experian discovered the age of vehicles financed is on the rise, too.

During the third quarter of last year, Zabritski revealed 63.44 percent of all used financing was connected to vehicles from the current model year, plus five years. A year later, that financing level for late-model units dipped 7 percent to 58.84 percent.

"We're starting towards financing older models," Zabritski indicated. "We're seeing older vehicles increase their role and relevancy in the finance marketplace. I know that's definitely important for lenders to look at, as far as how far to look back on what to bring into the portfolio. We'll continue to see this increase in the next several years as we see inventory changes."

Experian also shared lists of the top lenders for the third quarter, as well as a new set of data points — the top lenders and models for leasing.