Technology is a beautiful thing! And on behalf of all BHPH dealers, let me say a big “thank you” to all those providers who brought us GPS and starter-interrupt to help manage our poor credit portfolios! Now, which one is right for you? I’ll answer with a question. Do you want the payment or the car? Hmm. Well, what did you decide? Oh, I know, it’s not quite that simple but I do view this as a major difference. I view starter-interrupt as a payment motivator of sorts. When the customer is faced with the possibility their car won’t start, they call us! Or come in! Did I mention how much we appreciate you start-interrupt providers? Without GPS, we may not know right where the collateral is but that is not always first concern. Some of us in BHPH are pretty darn good at knowing where our customers are and where our collateral is parked. So, GPS may not be essential. For others with high cost vehicles, GPS may be what allows the dealer to sleep at night. Either way, as a BHPH “purist” I suggest that we all recognize that GPS is “making it about the car” rather than the customer or the payment. That’s okay for those who choose to go this way. I am simply suggesting that this philosophical difference is what should drive the starter-interrupt vs. GPS decision. (Got budget for both? Good for you!) For those choosing GPS only, please just avoid the trap of feeling like GPS is doing your collections job for you. GPS is helping you recover your collateral. Was that your goal? If not, remember that training and more training helps you collect more customers and payments.
Archive for the ‘BHPH Collections’ Category
I am a realist when it comes to the BHPH consumer. The reality is that poor credit consumers will only manage properly what they are required to manage. I am also a realist when it comes to priorities for poor credit and lower income folks. They have to take care of their families just the same as those with good credit. They have to eat and they need a roof over their heads. As a BHPH dealer, I say the car payment comes next! So, as a “front-line” BHPH dealer, I suggest that debt to income ratios are of little use. Oh, I take into account the house payment and the number of mouths to feed, but I place all other debts behind the car payment and we make the customer aware that we see it that way! Again, they will do it if we require them to do so!
If you’ve been around BHPH any time at all, you’ve heard the old story about the BHPH customer who says he couldn’t afford $200 per month but could definitely handle $60 a week. This is more of a reality than a joke. We have statistical proof! While I can’t tell you in a paragraph or two how much payment is too much, I can tell you there is a limit. And yes, every customer is different. But, on the whole, poor credit consumers are poor credit consumers because there is a limit to what they can manage. Push BHPH customers above $325/month (regardless of their income) and you’ll see a drop off in collection efficiency and a rise in delinquency and charge-offs! Doing well in this economy with an average payment above that, my hat’s off to you!
You run your past due list and there is someone on the list who was due yesterday but they didn’t show up and, what’s worse, they didn’t call! Somebody messed up! Problem is, it may not be the customer – at least not only the customer. In Buy Here Pay Here, we need to always look at ourselves first. Oh sure, the customers can be downright irresponsible or worse. But my experience reveals that we bear some of the blame some of the time. Sometimes we squeeze too hard for down payment and the customer neglects rent, or maybe we set the payments too high because we are trying to stay within a certain term. These are just a few examples. I see lots of ways we contribute to the customers’ failure. In a business like BHPH, there are some things we simply cannot control. So, we have to be very good at controlling the things we can. We can’t be the ones who “messed up.” Success in BHPH relies heavily on doing something for the customer that past creditors have failed to accomplish, providing a finance structure that the customer can handle. Then, simply holding them accountable for handling it!
I picture it being some sweet and very wise grandmother from the Midwest who originally suggested that one can catch more flies with honey as a way to suggest that a softer, sweeter approach might produce better results. As I picture the scene from the porch of her farmhouse, I don’t figure she was talking to a Buy Here Pay Here dealer or collector. That would ruin it! But BHPH dealers should take a page from grandma’s almanac. The reality is that human beings don’t look forward to paying bills. None of us look forward to that! So, rather than using an approach that involves a big stick, why not incorporate some incentives for customers to pay as agreed? Why not make a stop at your BHPH location something the customer looks forward to? How about free drinks? Maybe free check cashing? A reward program for on-time payments? Or just a friendly face who takes a minute to listen? Not all customers will respond, of course, so you should keep the big stick close by. This approach should be just one part of your collections program and one that will prove to cost less than most enforcement methods. It will also improve customer relations and employee morale! See, grandma was sweet and wise!
