If you’re looking for the most efficient way to build capital for your dealership, it’s to sell your auto loan portfolio on a buy-here-pay-here basis without adding new debt to your business.
According to Auto Note Buyers, this method provides dealers with more opportunities to expand their business, such as funding more customers, acquiring new locations, purchasing more products, and more.
In this article, we’ll take a look at the pros and cons for a person or company that sells auto notes with Debexpert, so you can maximize your capital in the best possible way!
About BHPH Auto Notes
Currently, there are many offers to purchase receivables from BHPH dealers from small financial companies.
It is thanks to the improving economy that capital has returned to a market that previously lacked sources of funding.
While wholesale car prices are consistently high, repair costs are also on the rise. However, the amount of money that BHPH customers can use as a down payment has remained stable over the years.
In order to maintain the level of sales and retain their customers, Buy Here, Pay Here dealers are forced to increase their cash per transaction with each sale.
It was all these factors combined that forced the dealers to sell their notes to BHPH.
Due to the availability of cash and higher costs, this option has become especially attractive to some.
Top Three Advantages
Now let’s consider what the pros of such a method of capital accumulation are. Here are the top three most important and major points that attract dealers to sell auto notes.
Eliminate Interest Expenses
A floor plan, a loan to finance operations, or lines of credit from banks are what dealers most often use. Some also hire partners to raise capital for the business.
According to Constellation Automotive Software, such dealers are sure that the sale of promissory notes will not only be an excellent alternative to the sources of financing listed above, but they will also retain more control over the process itself.
Fast Cash Flow
All of us have heard at least one story in which a dealer actually sold themselves out of business.
More often than not, the dealer had no funds left to restock or pay bills due to the rapid burning of large sums of money.
Sometimes even the best dealers’ real expenses can exceed the planned ones because they themselves may need cash.
By selling BHPH banknotes, this can be made easier.
Focus on Sales
Some dealers are of the opinion that the sale of banknotes leads to more efficient operations. In most cases, it is the buyer who is responsible for the collection when buying a banknote.
That is, the dealer and their employees can shift the liability for collecting banknotes to someone else and, at the same time, concentrate on selling cars.
Top Three Disadvantages
Not everything is so sweet.
This method also has disadvantages that should be taken into account.
In today’s article, we also identify the top three key points that are worth paying attention to.
Loss of Customer Relationships
Often, this is the main reason why some dealers do not sell banknotes.
It was through fair treatment and financing of the car purchase that they were able to establish a good relationship with the customers of their dealership.
With the first few payments, since many note buyers prefer not to buy new sales, the dealer could maintain these relationships.
For many years, BHPH dealers have relied on the fact that good customer relationships can help them manage late payments and encourage repeat and referral sales.
In their opinion, it is the sale of banknotes that can become a stumbling block in relations with a client.
Damaged Reputation
Actually, this paragraph is somewhat similar to the previous one.
In addition to the fact that the sale of banknotes can negatively affect, if not destroy, a dealer’s relationship with customers, choosing the wrong financing partner can also affect the dealership’s reputation.
This can be particularly affected by the rapid withdrawal of money and the harsh tactics involved in collecting it.
More often than not, dissatisfied customers blame the dealer, not the finance company that bought their contract.
Since the client did not choose the financial company, for them, it is essentially something faceless.
It’s you, as the dealer, who gets the hate, as well as unpleasant rumors spreading in the area.
Making Less Money
It may seem that the price of increasing cash flow is decreased profits.
The purchase of discounted auto notes by customers means that you, as a dealer, receive a smaller amount of money than if you yourself collected the account.
A common situation is when part of the money paid to you on an account is set aside until the account is fully paid off.
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