Inventory- How BHPH is Different than Retail

Hey, this is Jay Rose with Total Dealer Training, helping you to “Live your Lifestyle, Guaranteed!” We're going to talk about the differences between Retail Used and Buy Here Pay Here inventory. Now there's a few different factors involving your success with inventory and some of you out there may be a combination of the two. When I say Retail, just a reminder, this is where you have outside finance companies, whether it's cash or outside finance companies, even if they're subprime finance sources. BHPH is a different inventory process and mindset versus Retail used. BHPH is where you're working or living with the customer for the next three years. So not just is the mindset's different, but here are some specific differences between the two that we will discuss.

1) Acquisition of inventory. When you're in a retail store, you want to acquire vehicles that, you know, have a high demand in your area so you can appeal to what your customers want. BHPH dealers need to make sure they have what the customer needs, not wants, and vehicles they can afford.

2) As a Retail dealer, you also have to make sure that depending on your outside lending sources or subprime sources what is their loan to value or their lending requirements and sometimes they're higher on certain makes, so certainly keep that in mind whether someone wants to buy a car, but also the loan to value advance rate on those particular vehicles with retail. With BHPH, it really doesn't matter. It's important to have certain makes or models that customers want, but what you pay for them always needs to be the same $ amount. You still want desirable vehicles. If you have the money, trucks & large SUV are most popular. Small SUV's and sedans are next popular and then smaller cars & minivans are the least desirable. Well, I shouldn't say that minivans would be the least desirable, but there's still a niche market for those. So it's a little bit different mindset. You have to go into it with acquiring vehicles that, you know, you can get approved what the advanced rate is and back into what you have to pay for those, same thing with your cash, depending on your cash model and what what's your ACV meet the needs for your cash in deal, which is minus your down payment average when you purchase vehicles. So just remembering it's sometimes it's more make driven, especially if you're a new car store or you are trying to target certain makes versus this more dollar driven in BHPH.

3) The difference is Marketing. When you're marketing your vehicles, looking at different sources with retail, it's very common to use companies like True car, Offer up, Autotrader, Cars.com, Etc. These are websites that are predominantly for retail minded customers looking for price. And it's really important that you have to put a price out there. If you want to be competitive. If you're not on the first page of any of these sites, you're going to be overlooked. It's just a fact. And why spend money advertising if you're on page three or four, where they're never even going to get you, same thing with mileage, price and mileage are really important, making sure you list every single feature on the vehicle, in your descriptions for a retail advertisement, whether you're posting on social media or advertising on any of these types of sites, as I mentioned, but the key is it's focusing on 70 to 80% of the content of the AD should be all about the car and the features and the differences.

Now BHPH, it's completely backwards. You should not be advertising price ever unless you understand that you are advertising that your vehicles are $1,500+ more than KBB Retail and how a customer could negatively compare you to a cheaper Retail dealer’s price, then share that with 500 friends and family. If they call you to ask for Price or Mileage, it at least gives your team a chance to explain your BHPH finance program and your value compared to Retail prices. Or if you do have mileage, I wouldn't put mileage unless it's a super low mileage, get them to call you or text you or chat you for the information. Otherwise, you're just going to be advertising and giving them a reason never to contact you, which makes no sense because you won't get any leads, especially where nowadays, after the pandemic and the price increases due to supply shortage, it's not uncommon to have 150 to 200,000 mile vehicles, which customers may be scared about if they just see it on the internet versus if you explain it's still a great vehicle. By getting them on the phone, then you at least have a chance to convert them into the right customer that shows up, but you're not creating the objection by giving that high mileage or the price on your posted advertisement. You also should make sure that if you going to post a description, don't post like retail by putting all the, the VIN Exploder information about, you know, everything about the car itself. It should be copy paste your BHPH value bullet points and make the post about your finance program (you say YES when other dealers turn you down) while still having a nice picture of vehicle. In our “TDT Online Training”, we have examples of how to do this. It's all about your finance program. In fact, 90%, other than the one picture of a vehicle, everything should be about the finance program. When others say, no, we say yes, bad credit, no credit. If you're going to put a financial message, anything in there, it should be just down payment only, and then call for more information. That's important if you want to hook any customers and get them to actually contact you. These are just some tips that are really important regarding pictures, descriptions, where you're advertising whether it's in Facebook marketplace, Offer Up, Instagram or other Social Media sites, you need to make sure that you track that information to find out which sites are getting you better leads and which ones you're closing more BHPH customers.

Marketing is really important but merchandising in BHPH is slightly different. You want to make sure that you're only merchandising all your trucks and SUV's up by whatever you have for road frontage and put all your cars in the back. Don't put all your small vehicles up in the front line. People want to see the attractive vehicles. Then there's a little things just like in a retail store that's doing used cars. They want to put all the non make used vehicles upfront because everyone knows if you're a Toyota store, you're going to have used Toyotas so don't use up that precious space on the road frontage. What a Toyota does is put your non Toyota vehicles up there. If you just sell used vehicles, you can sprinkle them around to make sure they look attractive. If you don't have that many trucks or large SUVs, spread them out to make a fill up the space in a “W” formation. You never want to have so few cars where it looks like you're going broke, even though it may be because you're delivering more vehicles than you can actually recondition. I certainly understand what that's like helping dealers get better at merchandising, like not putting anything on the cars, like a VIN Exploder sticker that would visually make you look like a Retail dealership like CarMax. If you have to put something on the cars other than the FTC used car buyer's guide, make sure it's about the finance program and not about that specific vehicle itself. Another thing is security systems for vehicles, GPS, starter interrupt, things like that. Normally in a retail store, those are things that are sold after the purchase by the finance department and then they put them in before the customer takes delivery. Very common is if not a hundred percent all BHPH dealers will front load the GPS before they are finished going through reconditioning and before they come up front for inventory display. That way you can always make sure that you ping the GPS to confirm it is working if your customers are test driving without a finance specialist (salesperson) in the vehicle so you know where that car is at all times. There's a difference between maintaining your vehicles in your frontline inventory with BHPH versus retail. If you don't have any security devices in it, which has a draw on the battery or whatnot, your Inventory specialist should start the vehicles once a week, but with BHPH vehicles with a GPS device, you should be starting vehicles daily or you may want to start them at least three times a week, Monday, Wednesday, Friday. Also, you wash your cars about the same on Retail and to do that at least once a week if possible and depending on how dirty your vehicles get, because of the drive by traffic in your area. A lot of that is environment driven, but important is make sure you start your vehicles and let them run. While vehicle is running, you're going to be checking for any check engine lights, make sure the air conditioning works because these vehicles are 4, 5, 6, or 7 years old. It is not a new vehicle, it's not a three year old vehicle that's an off lease or two-year-old a vehicle that we bought from a rental car agency still under warranty. Our vehicles may be good yesterday. They may have come perfectly certified from of our master technician two weeks ago but this car may not start today and that's why you need to prepare for that. Whether it's starting your vehicles every morning or every other, noticing issues with the vehicles and getting those repaired properly and promptly is critical. The other thing too is in your purchase & underwriting process. In our TDT process, always go out with two keys when you go to get a vehicle for a customer (who they should be inside and you should not be walking customers out to a vehicle for the first time in case it doesn't start). You have a second vehicle key as a backup in case the 1st vehicle doesn’t start or has an issue. This allows you to grab the other vehicle, pull it around while the customer is still filling out their references with their head down. They don't see you jump-starting a car or making up for the problems with the vehicle that's developed since the last time. Then you should back out of its space, bring it to the front of your Branch location, back it up so the customer only has to drive forward when they start their test drive, open all the doors, hood, and trunk so you can do your walk around while emphasizing your financing program, not the features of the vehicle. We have more details and other videos on how to do a proper walk around and butterfly display the vehicle. The important thing is when it comes to the actual the getting the vehicle is always prepare for something happening with the vehicle. That's why you always want to grab two keys, not just one. Then when you actually do the actual walk around similar to the marketing or merchandising, it is not about the feature advantage benefit of that particular vehicle. It's all about the finance program. As you're walking around the car, reminding them that this isn't their perfect vehicle choice, we understand, but it's going to fit their affordability and basic needs of whether it's a sedan hatchback, a crossover. It's not about getting the perfect make model, miles, color or equipment, like a traditional retail store like you would at CarMax or Carvana. It's all about the BHPH finance program that in three years, not eight years like retail in three years, you're going to get a title, get it paid off and you know, get back on track. Explain that this is where you're going to compromise, so here's the best option available that you can afford and it fits your basic needs. That's where the walk-around explanation on the inventory is completely different than Retail.

Reconditioning is another important factor, not only how much you put in the car $, but what you actually do when I'm working with retail used car dealers. It's really important to make sure the outside cosmetics of the car looks shiny free of dirt or previous stickers on the vehicles. If your vehicles look really nice, it appeals to the customer. The engine, transmission and AC is more important than the cosmetic defects. Your BHPH customer needs to be closed on the value of getting a vehicle that will get them back and forth to work for the next three years, not getting their dream vehicle. You need to make sure the engine that transmission and the air conditioning are always working, especially in Texas, otherwise it's a, non-starter, they're not going to pay for the car, which is how we make our money. If those things don't work so well. In other videos, we talk about their customer repair process, but in reconditioning, it's critical to make sure that engine transmission AC works. Everything else doesn't matter compared to the reconditioning of a retail car, which is the outside needs to look good. All these little differences make a difference between whether you're retail or buy here, pay here. If you have any specific questions, definitely give me a call at the number below and if you liked this video, definitely forward to somebody else that you think it may help and we'll see you on the next chapter.