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O/T... Starting a new business..

cauthen96

Featured Member / Kilo Klub
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Lifetime car guy here. Been working for the man since the day I left ole miss and about to open my own lot. Where I live no one has credit and buy here pay here guys are KILLING IT. I mean MILLIONS a year killing it in towns of 10,000 people. Crazy money.

So Im just curious if my fellow brothers of the iron look down on BHPH? I know alot of people.. mainly way left democrats say its predatory and taking advantage of a bad situation.. but hell they are the one with a BK and 3 repos so if I have to charge 28% to cover my risk then whats the prob? They made the bed..

Here is a chart I rough drafted when getting my biz plan together..

Car figured in chart is 5000 my cost. sell for 9000. 2500 down finance 6500 at 20% for 24 month..

https://i.imgur.com/JAqhg9C.jpg

once again i can go as high as 28% if I want.

This is selling 5 cars a month so 60 a year.. usually you will sell that many during tax season so these numbers are VERY conservative.

If you sell 5 a month going 24 month terms at 2 years you will have 120 cars dropping off payments every month. $330 a month on the chart. a good average.. yes you will have repos overhead and repairs..

at month 24 you will have 38k in payments and 12500 in down payments considering you keep the average..

after everything net gain is 25k a month after two years..

lets be real conservative.. if you repo 1 out of 3 and spend 500 bucks on EVERY car on repairs.. you still make a lot of money. the reward is so great its worth the risk..

and now with GPS and starter interrupters etc the repo game is just go get it..

I know there are a ton of bright guys on here.. cpas financial advisors etc..

what do you guys think..?

Im currently doing dirt work and will be opening about may after tax season is over this year..

300,000 a year GROSS after 2 yrs.. less building,land,utilities,insurance,repairs, help etc.. and this isnt some exotic dealership.. so overhead should be somewhat low in rural mississippi. prob 75-100k yr overhead.
 
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On that chart you go negative $53,800 but then the profit starts snowballing.. so im starting with 100k liquid to get going.

Every payment past 8 months is PURE GRAVY
 
$500.00 per repair on a repo sounds low, dudes are gonna jack that thing up on the way out...I know some of those people who would have to buy from you...just sayin
 
$500.00 per repair on a repo sounds low, dudes are gonna jack that thing up on the way out...I know some of those people who would have to buy from you...just sayin

But I have their 2500 from the down payment..

If they do OVER 3000 bucks in damage to a 5k car...

Then I will lose a buck. But you have to TRY to do that..

two good friends of mine are doing this already.. they repo 1/5 average and if you check your customer out good you can do better than that.. job time, history, call refs, yada yada.

one buddy has 400 cars on the road already.. been doing it 5 years.. making over 100k a month.. pays himself 50k a month salary and didnt even go to college..
 
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I think the key to something like this is knowing the business and having a mentor. If you have friends already in the business as you said, then it's worth the risk. And you're right, now that those cars are tracked with gps, and have engine cut offs if a payment is missed, a lot of the headache is gone. I personally wouldn't buy from a place like that, but my sister has terrible credit and for her it was the only option to buy a decent car. Good luck with it.

On a side not, I just had a conversation with a friend about why no one has done this with motorcycles. It seems like you could make a fortune on the down payment in the spring, then repo all of them in the fall.
 
But I have their 2500 from the down payment..

If they do OVER 3000 bucks in damage to a 5k car...

Then I will lose a buck. But you have to TRY to do that..


two good friends of mine are doing this already.. they repo 1/5 average and if you check your customer out good you can do better than that.. job time, history, call refs, yada yada.

one buddy has 400 cars on the road already.. been doing it 5 years.. making over 100k a month.. pays himself 50k a month salary and didnt even go to college..

Brother man, even with a BHPH, you still REQUIRE them to provide you with proof of insurance with Comprehensive and Collision coverage. That way, if there's any damage to the car, fixed by insurance. You simply require that YOU are the Additional Insured/Loss Payee/Lienholder. You protect yourself that way. If they don't keep insurance on the car, repo it. You put that in the finance agreement

If they total the car, the insurance company will pay YOU first if they still owe on it
 
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Good luck.....have a ton of money to back you up..to make it. Gives you a comfort level so you can focus on business, and not trip on bills...
 
Brother man, even with a BHPH, you still REQUIRE them to provide you with proof of insurance with Comprehensive and Collision coverage. That way, if there's any damage to the car, fixed by insurance. You simply require that YOU are the Additional Insured/Loss Payee/Lienholder. You protect yourself that way. If they don't keep insurance on the car, repo it. You put that in the finance agreement

If they total the car, the insurance company will pay YOU first if they still owe on it

While I agree let me give you another side to that..

John makes 8 dollars an hour and pays you on time every month and never missed but now has lost his license or cant afford insurance.. but he needs a car to get to work and pays you every month.. and he is 9 months in. So its all profit at this point..

and if you repo johns car and then he loses everything do you think johns friends and family will do biz with you in the future.. and what if the next guy who gets the car doesnt pay on time?

so its def a fine line you walk because its a diff type of client.

that being said its SO much money out there if every other car is totaled without insurance you are STILL in the black..
 
I think the key to something like this is knowing the business and having a mentor. If you have friends already in the business as you said, then it's worth the risk. And you're right, now that those cars are tracked with gps, and have engine cut offs if a payment is missed, a lot of the headache is gone. I personally wouldn't buy from a place like that, but my sister has terrible credit and for her it was the only option to buy a decent car. Good luck with it.

On a side not, I just had a conversation with a friend about why no one has done this with motorcycles. It seems like you could make a fortune on the down payment in the spring, then repo all of them in the fall.

I would buy from one unless I HAD to.. But thats the case. These people do not have choice. I see people leave my brand new ford dealership with thousands in cash because a real bank wouldnt look at them..

And these people dont just want cars. they need cars..

and maybe in big motorcycle areas that might work..

where I live alot of families get 6-10k back at the first of every year.. and BLOW IT!!!! and wait til next year LOL..

I want a piece of that GOVERNMENT PIE they are handing out LOL just got to get it another way
 
While I agree let me give you another side to that..

John makes 8 dollars an hour and pays you on time every month and never missed but now has lost his license or cant afford insurance.. but he needs a car to get to work and pays you every month.. and he is 9 months in. So its all profit at this point..

and if you repo johns car and then he loses everything do you think johns friends and family will do biz with you in the future.. and what if the next guy who gets the car doesnt pay on time?

so its def a fine line you walk because its a diff type of client.

that being said its SO much money out there if every other car is totaled without insurance you are STILL in the black..

While you don't have to technically repo if his insurance lapses, you should still require that he maintain insurance, even if he carries very high collision/comprehensive deductibles. Some of the carriers I represent go as high as $2k deductibles. You may very well be in the black at that point, but in my line of work, we tend to look at worst case scenario.

If this were to happen to half of the 60 of your cars that you sold that year, they pay XXX down and owe $2k left on the car, total it. While you may be in the black, it'd be a heck of a lot nicer to have that extra $60k in the bank, no?

If he lost his license or can't afford insurance, he shouldn't be driving. That's my opinion anyways. I see waaaaaay to many people without insurance, and quite frankly, it scares me.
 
While you don't have to technically repo if his insurance lapses, you should still require that he maintain insurance, even if he carries very high collision/comprehensive deductibles. Some of the carriers I represent go as high as $2k deductibles. You may very well be in the black at that point, but in my line of work, we tend to look at worst case scenario.

If this were to happen to half of the 60 of your cars that you sold that year, they pay XXX down and owe $2k left on the car, total it. While you may be in the black, it'd be a heck of a lot nicer to have that extra $60k in the bank, no?

If he lost his license or can't afford insurance, he shouldn't be driving. That's my opinion anyways. I see waaaaaay to many people without insurance, and quite frankly, it scares me.

Agreed.

A friend of mine a state over has an insurance ageny he owns build next door.. and if your payment is 375.. 300 goes to car and 75 to ins.. so he gets paid on the car, 28% interest on the profit and gets paid on the policy every month while covering his ass..

$$$
 
You're right, it is a fine line. Just remember, you're a business, not a charity.

We have a BHPH in my area and he has such a bad rep because he does what he says he'll do, repo your car if you don't pay. People constantly complain about him while they get their 2nd or 3rd car from him :D (what you said above, the guy I'm talking about, his daughter opened an agency in his dealership lol)
Granted, the guy does some friggin sleezy stuff, but he does tell them "if you don't pay, I'm coming to get my car back"

Be prepared to hear a lot of sob stories, they will try to play all sorts of heart strings to get out of the payment for a few months.

If you treat people right and fair, don't try to rip them off due to their current financial situation, you will be successful. Too many people know that they can take advantage of these people and do (like the guy above I mentioned). You seem like you'll do the right thing, that will translate into success!
 
You're right, it is a fine line. Just remember, you're a business, not a charity.

We have a BHPH in my area and he has such a bad rep because he does what he says he'll do, repo your car if you don't pay. People constantly complain about him while they get their 2nd or 3rd car from him :D
Granted, the guy does some friggin sleezy stuff, but he does tell them "if you don't pay, I'm coming to get my car back"

Be prepared to hear a lot of sob stories, they will try to play all sorts of heart strings to get out of the payment for a few months.

If you treat people right and fair, don't try to rip them off due to their current financial situation, you will be successful. Too many people know that they can take advantage of these people and do (like the guy above I mentioned). You seem like you'll do the right thing, that will translate into success!

Exactly.. in this business with profits so high why would you ever treat people wrong?? but people still do.. my plan is to run a fair and honest biz. and also I will be reporting to transunion to help them build a future.. something most do not do
 
On a side note.. I went to the state required licensing class last week and there were bankers and financial advisers and investors in there getting there license and not one of them have ever worked a day in the car biz.


When I inquired they said a lot of bigger banks are buying bhph portfolios and some are even buying bhph lots and creating chains like car max..

They basically said making 70-100% profit plus 28% on your profit is a no brainer..
 
Speaking from a guy who own a few businesses and still does. Everything seems easy on paper and when you talk about it. Actually doing that business is a whole another story. I see that business giving you more headaches then you know.
 
Speaking from a guy who own a few businesses and still does. Everything seems easy on paper and when you talk about it. Actually doing that business is a whole another story. I see that business giving you more headaches then you know.

I agree. With repos and sob stories there will be bad days... But all jobs have headaches.. and once its established and doing well you can just hire people if you wanna get lazy and retire with a nice steady income.. or sell the biz etc..

Or sell your paper and let the banks have the problems..


I will gladly post my numbers in two years guys!! Win lose or draw
 
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I agree. With repos and sob stories there will be bad days... But all jobs have headaches.. and once its established and doing [B]well you can just hire people[/B] if you wanna get lazy and retire with a nice steady income.. or sell the biz etc..

Or sell your paper and let the banks have the problems..


I will gladly post my numbers in two years guys!! Win lose or draw

Good luck with that. You think employees care about your business like you? They will run that business down to the ground, You can never depend on anybody but yourself when it comes to your business succeeding.
 
It really is the only option a lot of people have. Everyone can talk all day about how unfair it is but if they don't come to your BHPH, they will be going somewhere else. It sounds like you're at least giving them a shot to prove everyone wrong. That's WAY more faith than a lot of people will get elsewhere. Good luck man, wish you the best.
 
Good luck with that. You think employees care about your business like you? They will run that business down to the ground, You can never depend on anybody but yourself when it comes to your business succeeding.

True.. But at what point is success determined.. all i want is financial independence thats the main goal..

If ABC Ford pays me 100k a year then what am I really worth??
 
True.. But at what point is success determined.. all i want is financial independence thats the main goal..

If ABC Ford pays me 100k a year then what am I really worth??

You are worth whatever you think you are. ;) I think I am worth a million dollars. I am waiting until our next surge in our economy. I came close before, now I want to succeed. :) You are on your way because you want to succeed, that is he first step. ;)
 

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