THE EVOLUTION OF THE BHPH BUSINESS

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THE EVOLUTION OF THE BHPH BUSINESS
ARE YOU A PERSONALITY DRIVEN BUSINESS OR A
SYSTEMS DRIVEN BUSINESS?

• Do you know who you are?
• Do you know where you fit in the industry?
• Do you know where you are going?
• Do you know what your winning BHPH formula is?
• Do you know how AutoZoom can improve your
  business?

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PERSONALITY DRIVEN BUSINESS
Personality driven businesses rely more on an
individuals abilities rather than proven systems
and automation. Such BHPH businesses at times
cause owners and managers to feel overwhelmed.
There are a number of possible disadvantages in
personality driven BHPH businesses
Missed sales
Inconsistent underwriting No measurement of
risk Poorly structured loans Higher skip
rate Excessive repo rate Low collectability
No formula
Everything depends on you!
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SYSTEMS DRIVEN BUSINESS
Systems driven businesses utilize all available
technologies and methods that make it possible to
duplicate or leverage human capabilities.
Systems driven businesses experience increased
Efficiency
Consistency Control Expansion Freedom
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WHAT SCORING IS
Scoring is a numeric evaluation system for
current decisions that is based on historical
data.
Potential repos cannot be identified via scoring.
Only the likelihood of early default can be
identified through scoring. The higher the score
the less likely a default will occur. Scoring
helps BHPH dealers identify strengths and
weaknesses in prospective customers. Scoring
also ensures more accurate and more consistent
decisions, enabling BHPH dealers to track
valuable decision-making data.
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WHAT SCORING IS NOT
Scoring is not an end all.
Scoring is not the Holy Grail. Scoring is not
limited to one numeric value. Scoring does not
make the final decision - You do!
Credit History
Job Stability
Residence Stability
Bureau Score
at Risk
Car Credit
Time in Area
Type of Employment
Down Payment
You are in control. Scoring simply makes you
better at what you may already be very good at.
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WORLD OF KNOWLEDGE
What a person knows is considerably less than
what they dont know and a lot less than what
they dont know they dont know.
DKDK
DK
K
WHAT YOU KNOW
WHAT YOU DONT KNOW
WHAT YOU DONT KNOW YOU DONT KNOW
For most individuals, BHPH scoring and repo
analysis usually falls in the DKDK range of
knowledge.
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REPO RATE
Repo Rate The number of vehicles that ultimately
come back as compared to the number sold.
In BHPH, just as in banking, there will be
repossessions. Dealers do not create repos. Most
repos are a result of one of three things good
people with poor means and good intentions not
being able to pay everything timely that is due,
mechanical failure, and/or physical damage. While
repo rate is an important factor to measure in
your business, a 30 to 40 rate is not alarming.
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REPO FREQUENCY
Repo Frequency The amount of time between the
sale of the vehicle and the repossession.
Frequency is much more important than Repo Rate.
The months in which the repos occur can make or
break a BHPH dealer. Eighty percent of all repos
traditionally occur within the first twelve
months of the life of a BHPH installment
contract. BHPH scoring enables dealers to build
portfolios that have repos peaking in later
periods. To maximize sales, dealers should target
a 30 to 40 repo rate coupled with a repo
frequency peaking in the fourth or fifth
ninety-day period following retail installment
contract originations. A protracted frequency
will minimize losses traditionally associated
with a higher repo rate.
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MEASURING REPO RATE AND FREQUENCY
Scoring Measurement and Standardization
Erratic and Sharper Curve Greater Loss
Smooth and Extended Curve More Profit
6 MO. 12 MO 18 MO 24 MO 30 MO 36 MO
REPO FREQUENCY
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COLLECTABILITY
Collectability The total payments received prior
to repossession plus the ACV of the returned
vehicle combined with all of the dollars paid in
by the good customers as compared to the total
receivables balance including interest.
ACV
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SCORING TO MAXIMIZE SALES
Scoring enables BHPH dealers to maximize sales by
pushing the envelope in BHPH without compromising
collectability. Additionally, it allows BHPH
dealers to maintain an 80 plus collectability.

• 1,000,000 in Total Receivable Balance
• ( 200 Accounts x 5,000 Balance ) x 80
  800,000

BHPH
SUB-PRIME
AGGRESSIVE
CONSERVATIVE
NORMAL
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SCORING TO MANAGE RISK
Scoring allows conservative dealers to increase
sales by stair-stepping down into more risk
gradually.
Numeric Standards Allow Controlled Risk
CONSERVATIVE
AGGRESSIVE
Scoring also enables aggressive dealers to
stair-step into less risk and improved
collectability without compromising sales.
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MAXIMIZE PRODUCT RANGE
Scoring enables dealers to become comfortable
with increasing the amount they are willing to
invest in vehicles. Greater product range
attracts a broader range of potential customers.
Greater sales volume is a direct result of the
greater product range.
Car Cost ( ACV )
Industry Sweet-Spot

• It is better to broaden product range rather
  than shift from range to range.

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MANAGE RISK RANGE
Stocking a few vehicles that command larger down
payments allows dealers to increase product range
without taking more risk.

• Limit risk range without limiting product range.

Product Range
ACV 2000
5000
8000
Down 500
3000
1500
Risk 1500
5000
3500
Risk Range
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WHY SHOULD DEALERS BORROW MONEY?
Scoring brings order to what bankers think is
chaos in BHPH. Traditional lenders understand
scoring. Therefore, dealers utilizing scoring are
more able to secure larger lines of credit and
greater advance rates.
In the page that follows, one can see that
failing to leverage your BHPH business greatly
reduces your return on capital. Conversely, by
borrowing dealers are able to realize much
greater returns on their capital.
Why not borrow?
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LEVERAGING BHPH
Using Dealer Capital Only
Using Revolving Credit Line
ACV 5,000 Down 1,500 Risk 3,500 Capital
Risked 3,500 Profit 3,500 Return on
Capital 100
ACV 5,000
Down 1,500 Risk 3,500 Lender Advance Rate
40 Gross Capital Risk 3,500 Lender Advance
(2,800) Net Capital Risk 700 Profit 3,500 Re
turn on Capital 500
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MANAGING COLLECTABILITY
By scoring on the front and analyzing repos on
the back, you can guide your business where you
want it to go.
DEAL
SCORING
REPO ANALYSIS
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CONCLUSION
Embrace New Ideas Now! Develop a Systems
Driven Business Measure Data Keep Score
Know Your Repo Rate Frequency
Learn from your past performance to improve your
future!
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CONTACT US
5424 Rufe Snow Drive, Suite 313 North Richland
Hills, TX 76180 [phone]
info_at_autozoom.com
Why Wait?
CALL NOW!