There are some misunderstandings when it comes to the BHPH industry. Many BHPH dealers have been accused of charging punishingly high prices for their automobiles. So much so, that various lawmakers throughout the country have taken it upon themselves to protect us from ourselves again by regulating pricing and repayment. Another common misconception is that they employ heavy handed tactics when collecting payment. Another is the lack of tolerance for any payment delinquency.
Firstly, it has to be understood that BHPH dealers are “fronting” many more dollars to the customer when they consent to put a vehicle on the road. Oftentimes, the dealer won’t reach a break even point until well into the sales agreement. It is not unusual for a BHPH dealer to wait 2 years before realizing a profit on what he sells. Also, the national average for repayment to the BHPH dealer is only 60-65%. That is not a very good percentage rate. He looses on many of his sales. That is just a plain fact. The only way he can maintain profitability is to charge more for what he sells. Non payment is the risk he takes, and paying more is the consequence of a personal financial meltdown. There are risks on both sides here, and, so far anyway, there is the freedom of choice to not enter into a deal that you believe is not healthy for you. The disturbing trend here is that the government in all their infinite wisdom is continuing down the path of regulations that will only burden both the consumer and the dealer resulting in higher prices.
Is is a common belief in the BHPH industry that, if payments are not received when the first few dates they are due, then the risk that the BHPH dealer has taken is not a positive one. He has to get the vehicle back, and move on. Let’s face it, if the consumer is lax about the first few payments, what is going to happen down the line. History suggests that this buyer will be a chronic non-payer. That individual’s behavior brings prices up and taints the selection process for others. However, past experience does suggest that, if a customer has been a making prompt payments for many pay periods and has a rough patch, the dealer is more inclined to be tolerant. Prompt payment allows for the dealer to stay in business and provide reliable transportation for the credit challenged. He is not a monster. He operates his business to make a fair profit like every other business. He is not different than the grocery store owner, the gas station owner, or the local landscaper. These people aren’t reviled and disparaged. BHPH dealers are normal businessmen who engage in a risky enterprise. They are the last chance for many credit challenged. They provide a service and expect a profit. The last time I checked, that was what our economic model was all about.
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This article was written by Brian McCormick of Providence, Rhode Island. Brian is a BHPH expert and has been involved in the used car and BHPH industry for over 40 years. He enjoys his family and his favorite sports team, The Boston Red Sox. He Graduated from the University of Rhode Island in 1970. Follow him on Google+
