The Importance of Your Buy-Here Pay-Here
By Steele Gudal
Many dealers considering the buy-here pay-here business underestimate the importance of their facility and its location. They still picture this industry operating out of converted gas stations and gravel lots on the poor side of town. With that image of their competition, they end up aiming lower than they should. Sometimes it is out of a desire to keep their overhead low. Sometimes it is because they are poorly capitalized. But sometimes they simply think that their image of the competition is all they need to be. I want to use this column to explain the benefits and importance of choosing a good location and operating out of a quality facility.
First, you need to pick the site. An area with other buy-here pay-here dealers indicates that there is a market, but it does not mean that it is where you need to be. Other indications of the proper customer base include the presence of laundry mats, rent-to-own stores, pawn shops and apartment buildings. But ultimately you need to look at demographic factors such as the median income in the area, the concentration of renters and the stability and level of employment. You are looking for solid, blue collar neighborhoods. Realize that if you locate in an extremely poor area, all you will get is the poorest of the customers. Ideally, you want to be in a stable retail area with good visibility, high traffic counts and frontage on a main road-just like a new car dealership.
Next, you need to choose the facility. The facility will speak volumes to your customers, and will impact the level of customer you can attract. The facility also says something to your employees. It will determine the level of personnel you can attract as well as their attitudes while they are working. You need a clean and well-lit facility that will attract the customer you want and make your employees proud-just like a new car dealership. Nobody wants to shop at that run-down former gas station on the gravel lot, and nobody wants to work there. Perception is reality, so what you end up with in that situation are the customers and employees who have no other choices.
Beyond the appearance of your facility, it needs to be functional. I believe that having vehicle service capabilities is a necessity. It is also a good idea to have some separation between the sales and finance offices. It is not that important to have a showroom, but it doesn't hurt. As far as lot size, one to two acres works very well. We have found that, due to industry consolidation and manufacturers' requirements to upgrade and relocate new car dealership facilities, it is possible to find former new car stores which work rather well. Often the demographics of those locations are ideal for this business, they can be purchased for the right price and the expense to convert them is minimal.
As a final thought, I suggest that you look at your real estate and advertising expenses combined, rather than as independent items. You can spend $10,000 per month on real estate and $6,000 on advertising, or you can spend $6,000 per month on real estate and $10,000 on advertising. If you spend the larger portion on real estate, I believe that you will have better long- term results. The better facility will attract more and better customers, which will lead to higher quality receivables, which will show up on the bottom line. That facility will also still be there when the latest sales campaign is over. In fact, you should think of your facility as advertising. It is your image within your community, and it sends a consistent, 24-hour-a-day message to your potential customers. It is easy to start with the image you want and then build the facility. It is hard to start with a poor facility and then build a quality image.
Steele Gudal is the President and COO of J.D. Byrider Franchising, a chain of 95 buy-here pay-here dealerships operating in 32 states and Canada. Byrider and its franchises own and service approximately $400 million in BHPH receivables. Gudal personally owns three locations in the upper Midwest, with $20 million in receivables.sgudal@dealeronline.com
