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LAS VEGAS – This year’s National Alliance of Buy-Here, Pay-Here Dealers conference found dealers more subdued than last year.
Dealers were excited at last year’s event about the opportunity created by the subprime finance collapse.
But since then shortages of inventory and working capital have stifled their attempts to take advantage of this situation.
DriveTime, the national chain of in-house finance stores, is the poster child for what happened last year.
The company depended on securitization for its main source of liquidity. That shut down entirely with the credit crisis.
Then DriveTime executives found themselves worrying they would lose their biggest credit source. They avoided that problem, but other challenges caused them to overhaul
operations.
The company closed a quarter of its stores. It cut staffing and hours at the remaining locations.
Cutting was only part of DriveTime’s new strategy. The chain invested in a new collection system and centralized its 37-plus days delinquencies.
Change is the only way to survive in this climate, said Ray
Fidel, DriveTime’s CEO.
“If there’s anything we can learn from the new-car business, it’s you can’t have a culture based on the past,” Fidel said.
The past does offer some guidance, though. Brent Carmichael, a consultant with NCM, said dealers must return to the basics of the buy-here, pay-here business.
“We’ve got to get back to the blocking and tackling of buy-here, pay-here,” Carmichael said.
The past year was an unprecedented mix of bad economic factors. Dealers experienced record high and record low gas prices, inflation, deflation and a credit crunch all within 12 months, said NABD founder Ken Shilson.
The top dealers did more than survive this volatile market. They thrived.
“If they had capital, they used that capital to take advantage of some excellent growth opportunities,” Shilson said.
More dealers saw buy-here, pay-here as the best way to respond to the shifting market.
Manheim Chief Economist Tom Webb said a higher number of low-priced vehicles were bought and sold in 2008 despite overall flat auction volumes.
More than 60 percent of Manheim’s 100,000 unique buyers purchased at least one vehicle in the $1,000-to-$5,000 range last year.
Webb said the economic downturn probably reached its low point this spring, but the recovery will be an extremely drawn-out process.
Making matters worse for dealers is an inventory shortage brought on by the steep decline in new-vehicle sales.
“We cut out a third of the market just like that,” Webb said. “We’re not producing used vehicles.”
Most attending the conference believe the buy-here, pay-here segment will overcome its obstacles and flourish.
Shilson said the segment might need an image overhaul, including a name change.
“I love the business and I respect it,” he said. “But unfortunately the negative image of buy-here, pay-here is something we’ll never be able to overcome.” |
