BANDON, Ore. — The latest Retail Automotive Summary from CNW Marketing Research indicates that 2010 will turn out to be a big year for buy-here, pay-here (BHPH). The research firm is projecting sales of more than 2.3 million BHPH units before the year is out, topping last year’s total of 1.84 million.
Dealer-provided financing, once considered the domain of small, independent lots stocked with vehicles of questionable roadworthiness, has come into its own as marginally credit-challenged customers have been turned away from traditional lending sources. CNW’s Art Spinella noted that average values for BHPH units have increased as well, a clear indicator that more stores — including franchised dealerships — are responding to the demand.
In the year 2000, according to CNW’s figures, 1.32 million of the 29.7 million used vehicles sold by dealers were BHPH units. Those figures didn’t change much for several years until the global economic downturn put BHPH in the spotlight. Last year finished with 1.84 million BHPH sales on the books and no immediate change to credit availability on the horizon.
The report noted that high gross profit margins — ranging from 32 percent for franchised stores up to 43 percent for some independents — have also helped to make the prospect more attractive to dealers. But BHPH, like any other segment, also faces an inevitable market correction.
“As credit loosens, BHPH sales may well decline somewhat, but remain both significant and profitable,” Spinella wrote.