Good intentions, bad plan

Below is my response to questions from a dealer regarding combining buy here pay here and traditional car sales.

Dale,

I have only been using vAuto for a couple of months now, but I see the power this system has and it is a pleasure hearing you speak on the webinars and dealing with my account manager Glenn.  My father has been in the car business for decades and says that it is refreshing listening to you because you are one of the few people in this industry that knows the business. 

I am writing you today because I have been presented with an opportunity.  I could be going to a buy here pay here dealer that has 4 lots and 300 cars total and all he does is post his cars on Craigslist stating $1500 down and you drive and no price because he doesn’t really retail that many a month.  His website has no SEO or content and most of the traffic he gets comes from Craigslist.  He takes a variable amount of photos for each car and some of them are taken before he has cleaned the car.  His sales people are overrun and he does 60-80 buy here pay here with a few retail included a month.

He is not tapping into the retail market for his vehicles at all and I feel that if I implement what I want to I can sell all of his inventory every month and do buy here pay here deals at the same time.  I am currently selling half of the inventory where I am now and I am just on AutoTrader Featured and Cars.com, do not get any local traffic and our website does not get much traffic either.  Where I was previously I was selling 50% or more of the inventory and was not yet on AutoTrader or Cars.com, so I believe that doing everything that I want and taking care of the customers properly when they come in, I can achieve the turn of 17-18 times a year like the top performers that use vAuto.

This is my plan so far and what I intend to implement and sign up for.  Please let me know what you think and if you have any suggestions.

1. Start retailing all of his cars, so he is not just limited to buy here pay here, but I am not sure how I would word a disclaimer to state that the price advertised is the cash/outside financing price.  If buy here pay here [blank] amount down and you drive for [blank] a month.
2. Go on Cars.com and AutoTrader Premium for 2006 and older – shoot for at least 30,000 VDPs a month and try to stock cars that are on their popular lists.
3. Send inventory out to every third party website I can
4. Monitor and price cars using vAuto
5. Get a better website that we will optimize for search engines and do PPC to supplement traffic
6. Take 32 high quality photos of each car and have video of the cars
7. Get the cars online as fast as possible
8. Post to Craigslist and actually monitor it
9. See what salespeople he has and determine if he has enough and whether they are quality people
10. Start retailing more expensive cars in order to get trades and to create the feeling that they are at a real dealership and not just a buy here pay here lot.
11. Put billboards in front of all the franchise dealers around us stating that we will buy their car for more than they are being offered to trade it in.  Do you think this is going too far? lol

Thank you for any help.  -J

J,

Your plan looks good.  However, I fear that there may be one fundamental flaw.  Specifically, I’m referring to the fact that the rules of engagement for a sub-prime/buy here pay here lot, and traditional used car sales are completely different.  Everything from what you stock, how you value vehicles, how you price and promote them, and handle customers is different.  Really, the only thing that the secondary and traditional used car businesses have in common is the fact that there is a car involved in the transaction.

Too many dealers make the mistake of not recognizing these differences and as a consequence, try running two businesses from one lot with one strategy.  The result is that you end up doing a sub-standard job at each.  The ideal situation if it’s possible is to have a different lot, different cars, different pricing, different web site, different sales people and so on.  When this type of separation is not feasible, you should try and create as much separation as possible because you’ll need to operate two separate businesses at the same location.  It’s just plain difficult to do.

I’m sorry if I’ve rained on your parade, but I just think that you need to know the challenges that will await you.

Dale

SOME ADDITIONAL COMMENTS…

Dale,

Thanks for all your help.  In that case do you believe that it would be in my best interest to stock 150-200 retail on one lot where it has been doing 40 buy here pay here and then just directing those customers to the other lots which will hold the buy here pay here vehicles and no retail, or do you believe that because it already has those customers it will hurt the buy here pay here business.  I just don’t want to hurt the flow of customers they have their already.

I just want to maintain and then increase the buy here pay here and sell a lot of retail vehicles.

Also since my background is not in buy here pay here do you know of any companies or websites out there that I can visit to further my education?

Thank you again. –J

J,

Oh boy!  The buy here pay here business is a very different business.  If you don’t have a lot of experience, I fear disaster.  You’re not really in the car business, but rather the money lending business.  There are techniques and knowledge that go far beyond my expertise.  All I know is that I wouldn’t attempt the buy here pay here business, even with all of my understanding about the used car business.  The only way I would get involved is with the assistance of a quality business partner.  A couple of these that come to mind are JD Byrider, or Leedom and Associates.  Please proceed mindful of this warning. 

Thanks,

Dale