Buy-here-pay-here (BHPH) and lease-here-pay-here (LHPH) programs are two important ways to serve markets and capture revenue that might otherwise go untapped. The ability to offer vehicles to people with credit blemishes can be very productive to both sides, but you must make sure you have structured your company and lending procedures in a way that protects both you and the buyers.
Here are five things you should do when starting a new BHPH or LHPH program:
#1—Understand Legal / Regulatory Requirements
It is a good idea to appoint both a compliance officer and a privacy officer to make sure that you are aligned with all applicable laws and know how to protect customer data. You are likely to be subject to new records retention requirements and other obligations. If your company is too small for a full-time compliance officer, consult an attorney with experience in vehicle finance law.
#2—Vet Your Vendors
When choosing vendors, you must ensure that they are in compliance as well. When selecting telematics and finance products, make sure you are not introducing potential legal headaches in the form of unreliability, data leaks, a lack of awareness of applicable regulations and other problems. Look for a vendor with a long track record of data integrity and reliability serving the vehicle finance market.
#3—Create a Game Plan for Success
One key component of subprime finance is the ability to track and recover the financed asset when necessary. It is not enough to install a GPS tracking device and call it a day. You must have a game plan in place that guides how you will use the technology when all is well and what steps to take when a problem occurs.
#4—Work with Your Provider to Maximize Opportunities
Your GPS provider can help you maximize revenue opportunities not just by helping you manage your financed vehicles, but by providing services you can sell to customers. This is an opportunity for customers, too, as they can receive alerts to help them maintain their vehicles properly and get the most out of them. Look to your GPS provider for ways you can strengthen and deepen your relationship with your customers.
#5—Document Successes and Failures
As you launch your finance programs, be sure to document what has gone right and wrong. Use this information to inform ongoing policies and procedures, creating a feedback loop that drives continuous gradual improvement into your business and your bottom line.
Be especially attentive if you launch an LHPH finance program. Because LHPH technically does not involve a sale, the benefits and obligations that accrue to you are different, as are the laws governing the profits and tax obligations. There can be substantial tax advantages in the short term as well as a healthy revenue stream for your business. Be aware, though, that the tax laws and other regulations around LHPH can be complicated and there are consequences for getting it wrong.
To learn more about how CalAmp helps make vehicle finance hassle-free, check out our LenderOutlook solution for BHPH dealers and Vehicle Finance companies.