HOUSTON — The National Independent Dealers Association’s recently appointed president certainly has his plate full balancing both his buy-here, pay-here dealership Fincher Motor Co., as well as his new role as head of the association.

But Don Fincher doesn’t seem worried as he expands his perspective from that of a local Texas BHPH dealer to head of a national organization and shifts his gaze toward Washington. The new head of NIADA is now focusing on joining with the association’s lobbyists and lawyers in the Capitol to fight industry overregulation as he also strives to continue to improve the reputation of BHPH and independent dealers as a whole in the U.S.

But when his attentions shift back to his Houston dealership, how to adjust to and deal with high-auction prices continues to be his and most other used-car dealer’s daily mantra.

Though Fincher says staying competitive in pricing is crucial, even as auction units go for more and more, he believes some of the big reasons why he and his dealership have continued to be successful in a difficult market comes from experience, dedication to customers and the open-mindedness to learn and utilize new technology and practices.

Fincher’s experience in the BHPH industry started early, when he went to work in his father’s Texas dealership, Fred Fincher Motors, at the age of 15.

Falling into line at his father's business, Fincher noted he did everything from pick up coke bottles on the lot to detailing cars and working at the salvage yard.

“I have never had a job outside this industry; It is all I know,” Fincher pointed out, noting it's in his blood.

After working for his father for 18 years, Fincher founded his dealership in 1986. At that time, financial difficulties had caused his father to have to close six of his seven shops. Fincher took over a lease at one of the shops and began the business that is still running strong today — Fincher Motor Co.

The BHPH Market Continues to Thrive Amid Economic Turmoil

Though his dealership these days is run mostly by Fincher’s son Don Fincher Jr., he says the realities of today’s struggling economy are still at the front of his mind — though the market’s downturns don’t seem to have the same negative effect on the subprime world as other market segments.

To highlight why the BHPH market continues to thrive, Fincher said the simple answer is “quite obvious.”

“The subprime market will continue to thrive throughout any economy, especially one that is forced many families into situations that hurt their credit,” he stressed.

Though Fincher says he “feels” for those who had their credit destroyed or hurt by the recession, he feels as that BHPH dealers play a vital role to this credit-challenged consumer segment.

“There is just something wonderful about knowing you are helping those who could not find transportation to and from work, get the service and car they need,” Fincher said.

“It is a very good feeling to be in a business where you can help someone get into a vehicle, and they come back and they come back, and you start selling to their kids and children,” he continued.  “Being in it as long as I have I have, I have seen that, and how we have been able to help people is something I wouldn’t pass up for the world.”

Moving on to talk about his dealership, in particular, he noted that through the economic downturn and the faltering market as of late, his dealership has not suffered too much thanks in part to Houston’s “resilient economy and ability to diversify.”

“Houston and Texas have definitely not been hit as hard as other parts of the country by the recession and market troubles; granted, we have not had it easy, but the state is very diversified and invested in oil, gas and lots of other things. This has kept our market going,” Fincher stressed.

He also gave some insight into how BHPH dealers can ensure their own stores continue to thrive.

“As a dealer, you have to find your niche, whatever that may be,” advised Fincher. “Find your target audience and go after them."

Illustrating his point by describing his own local market, Fincher said that his dealership definitely caters to the Hispanic community and even has a Spanish speaking sales person, but the dealership “definitely has a diverse customer group — 20-30 percent Caucasian, 30-40 percent African American, and the remainder would be Hispanic,” Fincher noted.

“You have to figure out what is important to your particular market and focus on it; your customer base is everything,” Fincher stressed.

An Industry Veteran's Advice, the Realities of High Auction Prices

Moving on to highlight some of the tried-and-true business practices Fincher has adopted over the years, he first touched on an issue that has many dealers in a quandary— high auction prices.

With dealers, independent and franchised alike, struggling with high auction prices, the question is: how does one still make a profit?

Fincher — who’s dealership gets 98 percent of its units from auctions — says raising lot prices cannot be the answer, in fact, he believes a dealer might just have to grin and bear the loss of cash.

“Well they (auction prices) have certainly gone up; years ago, you could buy a car for $2,000 to $3,000 and market that,” said Fincher. “Those cheaper cars don’t exist anymore, unless you buy one with over 180,000 miles on it.”

Though auction prices have gone up, Fincher says a “dealer has to figure out how make up the lost income somewhere else in the business, not by raising prices — you have to stay competitive in the market.”

Due to the current market conditions, Fincher explained that the average price of a vehicle on his lot today is $6,000, a price he says consumers are “accustomed” to these days.

“People expect those prices now; they don’t expect to pay $4,000 for a car anymore,” he added. 

The Houston dealer said competition forces dealers to be realistic in how much they can charge, despite the high wholesale prices. In today's environment, there are so many stores online, and consumer online research is so prevalent that dealers need to keep their prices in-line with their competition.

“Consumers can research a car to death on the Web, what model, how much it sells for etc. Even though we had to pay more at auctions, we cannot bring prices up more; we accept that and make less money, but we are still selling!” Fincher stressed.

Protecting Investments

That said, Fincher also noted there are ways dealers can “make up losses”  from high-auction prices as well as protect their current investments.

One way this veteran dealer says he protects his own investments is to “never compromise when it comes to your underwriting process.”

“We have always required the same thing for references, five to six relatives and three friends, and you have to use a reliable background check company,” he remarked. “These measures are extremely important at all times, but especially so in an economy that is struggling and people become more desperate.”

Fincher went on to point out that dealers need to be wary. He has seen fraud become more prevalent in the past few years since the recession began in 2008.

“BHPH dealers have to be really careful about pay check stubs, there are even programs people can buy now for the purpose of duplicating pay stubs,” he cautioned. “For a while there, it was a real big problem, and it still is. You almost have to call employers for verification.”

Moving on, Fincher says technology has made it has even easier to protect your investment once it makes it out of the lot and onto the road. By utilizing GPS technology, repossessing becomes much easier and simpler, he highlighted.

In fact, according to Fincher, installing GPS technology, as well as starter interrupt devices, is a must for BHPH dealers, especially now that the devices have come down in price.

“When this technology first came out, it was expensive and you picked and chose which units were involved in the riskiest transaction, and you put one in them. Now that it is getting cheaper, you can use it on all of your units,” he noted. “And, it really does work!”

So how does Fincher believe a dealer can make up cash losses due to high auction prices?

One way to do this — which his dealership has utilized in the past — is by selling receivables, but he warns dealers to use caution with this avenue.

“This BHPH business is all about cash flow; it is sacred. If you get rid of too many receivables, it can cause some real cash flow issues,” he warned dealers. “That said, my advice would be, if you need to sell, do it at times when you really need the funds, to pay taxes, for example, but never ever sell them all.”

Lastly, Fincher touched on the fact that at the end of the day, the best way to protect your income and reputation is to value your customers.

“From doing some small repair work for free, to taking care of a loyal customer, to following up after a purchase, serving and helping is what it’s all about, and it will pay off,” Fincher suggested.

NIADA Presidency: The Shift to Washington

As Fincher focuses more on future of independent dealers as the head of NIADA, he shifts his gaze to Washington and notes that the biggest threat to the BHPH businesses and dealers as a whole is overregulation, not a struggling economy.

He says this fight against overregulation is going to dominate his time as NIADA president.

“We are trying to help dealers across the country, we are fighting for smaller and bigger dealers who are being overregulated. We are trying to make a difference in that respect,” Fincher said of NIADA’s current efforts.

Citing the recent formation of the Bureau of Consumer Financial Protection as an example, Fincher noted that “all the things that the administration is doing to hurt small businesses has all of us in a quandary about what to do.”

He even went on to stress that some dealers are just hanging on until the 2012 election, “in hopes of finding a better ally.”

Also a problem for BHPH dealers, and the industry as a whole,  is overtaxing, says Fincher.

“The government is looking into finding ways to regulate us more, they are looking at us (dealers) as a tax base, saying, ‘they make a lot of money, how can we tax them?’  That is going to hurt our industry. The economy is not hurting this market, Washington is,” Fincher explained.

As the Texas dealer positions himself alongside NIADA lawyers and lobbyists to fight against high taxes and small-business regulation for his industry, he also sees his position as NIADA president as a way to continue improving dealers’ reputations country wide.

“I want to continue to improve the image of the dealer and the dealer community,” he told SubPrime Auto Finance News.

“I have met dealers all over the country whose integrity and respectable business practices never cease to amaze me. I am always working toward breaking stereotypes associated with dealers, as well as improving our status and reputation among business owners and consumers alike,” he said.

What’s in the Cards for the BHPH Industry?

Lastly, when asked about the future of the BHPH industry, Fincher responded positively, but again mentioned potential problems caused by overregulation.

“The subprime industry is going to be good; I think it’s going to continue to thrive with the economy we are in right now. The issues are coming out of Washington,” he further explained.

Fincher says issues such as overregulation and taxing, under the “guise of consumer protection,” will end up hurting an industry which has the opportunity to continue doing a vital service by providing transportation to credit-challenged individuals.

“The BHPH business is a thriving business, and the consumer doesn’t really need any more protection. They have the Internet to research, if they want to, and they have all the tools at their fingertips.

“The future of the market hangs with the politicians; if they are going to regulate us or tax us to death it is going to put a lot of people out,” he continued.

Fincher also noted that if the government continues to “squeeze” the remarketing industry by over regulating, curbstoning — when a person purchases vehicles at volumes that require a dealer license and then poses as a private seller to sell to unsuspecting buyers for a profit — might be on the rise.

“Overregulation will make people go underground, fostering hyper curbstoning. It is also going to force dealers to send cars overseas to places like Iraq and Afghanistan more and more. In fact, I have already seen dealers start sending their units overseas.” he further stressed.

Is it Still a Good Time to Jump Into the BHPH Business?

That said, Fincher also reiterated that the BHPH business is still “booming,” and he predicts it is still a good time to get into the market.

His only warning: “Have a lot of cash.”

“Since we cannot buy cheap cars at auction anymore, it doesn’t take many purchases for a dealer to run through a lot of cash. After paying $6,000 for a car at auction and reconditioning, that is going to add up.”

“If anyone is getting into the business, you have to have a significant amount of cash, not like in 1986 where you could start a business with $50,000, like I did,” Fincher asserted.

The NIADA president went on to note that though it might be an investment, the BHPH business is “primed and ready for action.”

“The subprime business has always been a profitable one, but you may have to sell cars for cash to raise capital or use a third party lender to make it in this day and age. I wouldn’t say it’s a bad time; the subprime market is going to be around forever. With the economy in the state that it is, people don’t have the credit they used to,” he said.

Besides market and investment concerns, the head of NIADA offered one more piece of advice for those who are looking to make it in the BHPH business: “My dad used to say, ‘Son, remember this, when you are green, your growin’, when you’re ripe, you're dead.’”

Fincher went on to stress, “I don’t know how wise I am, but I am trying, and I will tell you this, I am adjusting my model all the time to make it work and make it better, but again, serving and helping people is what it is all about.

“If you keep that as your mission, it will make a lot of things a little easier. My dad also said, ‘if you don’t make any money you can’t help people.’  It’s a challenge, but it is important.

“My son is in this industry, too, so I am going to try to protect it for the next generation,” he concluded.