Weekly, I receive calls from new car franchise dealers who are considering whether to expand into the buy here, pay here (BHPH) business. The most frequently asked questions are: Do the rewards justify the risks?, What financial results can dealers expect from a properly managed buy here, pay here operation?, How do buy here, pay here results compare with profits generated from new car operations?.

This article answers those questions by comparing results of both automotive segments for 2003. First, let me acknowledge where the numbers come from. The National Auto Dealers Associates (NADA) industry for 2003 is the source for the franchise dealers results below. As for buy here, pay here, I utilized the numbers contained in the National Independent Auto Dealers Association (NIADA) National Market Report.

Need more numbers? My CPA firm currently serves over 250 Buy Here, Pay Here dealers nationwide and recently compiled 2003 industry benchmarks for the National Association of Buy Here, Pay Here Dealers (NABD). A comparison of NABD members results with those of franchise dealers are summarized below:

All of the above referenced numbers indicate that the financing profits which can be earned in the buy here, pay here industry are substantially greater than profits generated by new car franchise dealers from selling cars. A few words of caution: The buy here, pay here industry is very different from franchise operations. In buy here, pay here, selling the car is not as important as managing and collecting the subprime portfolio. Therefore, franchise dealers are encouraged to educate themselves about the pitfalls of buy here, pay here operations and to avoid making mistakes, which could cost them millions of dollars. Those who enter the business need a consistent well-developed business model, a solid business plan which identifies the capital requirements, and well-trained personnel who can execute.

The buy here, pay here industry of today is a highly competitive, high risk, high reward business that is not for everyone. However, the numbers above clearly indicate that it can be one of the most profitable segments of the automotive industry for those who operate intelligently.

Kenneth Shilson, CPA is managing partner of Shilson, Goldberg, &- Associates, L. L. P. a CPA firm in Houston, Texas, 713-290-8171, which provides accounting tax, and consulting services to buy here, pay here dealers nation wide. He is the founder of the National Association of Buy Here Pay Here Dealers (NABD) which will hold its annual conference on May 26-28, 2004 at Caesars Palace in Las Vegas, Nevada. Further information is available at NABD website-www.bhphinfo.com.