Interview with Julian Coddling of Reliable Motors
Get Approved for Your BHPH loan before You Walk into the Car Dealership / Apply Here
Do you believe the financial crisis had a negative, positive or neutral affect on the BHPH industry?
Overall a positive effect because it has driven so many special finance dealers out of business that where getting the "cream of the BHPH customers". But "a rising tide lifts all ships". So does a lowering tide. "Jobless recovery" is spin. There is no such thing to the consumer as a jobless recovery.
Are you seeing more new car dealers entering into the BHPH business? If so, why is this the case?
The obvious reason, the new car business has been through hell and has a ways to go. Also, in general the BHPH business is much more consistent than the new car business. In today's product driven new car business last year's hot model is old news. Also, there is another less positive reason. It comes from the quote "Greed has destroyed more fortunes than it has made". If you are a new car dealer and you're in serious financial trouble you don't want to be a BHPH startup. Wake up! This new business you are going into is going to take a hell of a lot of cash. That new building that the new car factory made you build has a 30 year amortization on it. Be real careful with what moves you make with your cash and credit lines.
If more new car dealers are entering into the BHPH business do you believe the supply of BHPH used cars will eventually dwindle because the majority of the new car dealers are selling there trade in vehicles verses wholesaling?
The real issue on used vehicle availability is how many new vehicles are being sold. It is true that new car dealers getting into BHPH will some impact. But the big numbers are from the source which is new vehicle trades.
Where do you see the BHPH business 15 years from now?
I'd see two groups of BHPH dealers. The higher end will be part of new car groups in dealership type settings. There will always be a place for the small BHPH dealers that have good relationships with their customers. One reason that no one ever brings up is that its the "graduation process" where BHPH dealers lose their best customers eventually as they climb the credit ladder. (the credit ladder is a two way street because it reflects the ills of society; 50% divorce, drugs, lack of viable employment skills, health costs, unemployment caused by global and national economic changes that are "tidal changing type events". If a BHPH dealership is part of a new car group they can keep those customers if they are smart enough to realize the tremendous potential. Everyone wants to focus on the repos. Guess what, they all lose. The credit graduates are just as expensive but they are an "opportunity cost" that is silent.
Is the internet playing a bigger role in the BHPH business?
Probably more in the credit decision process is where its most underutilized. We check public records and a part of the credit investigation process. We've found a 2nd grade schoolteacher that used to be a prostitute, several armed robbery types, some child molesters and a murderer all of which we would have otherwise approved. As far as the retail part, the internet is only a very small part of the marketing process and while growing it is nothing compared to the new car business. Remember its an incorrect comparison to look at a new car store and BHPH. They are selling different products. Its easy to get confused.
Do you believe after sell products such as insurance are becoming more prevalent in the BHPH business? Do you see this as another profit center for BHPH dealers?
No. BHPH dealers are getting all they can in gross and interest. There is only so much the customer can pay. That's reality. Remember that line about the straw that breaks the camel's back?
As technology improves do you believe the repossession rate will decrease?
No. Technology may change the cost of the collection process and the surface delinquency rates, but it doesn't address the core issue that people can only pay what they can afford. Everyone wants some Star Trek solution. When you hear that devices train the customer it reminds of using shock collars to train dogs. If you can't think of a BHPH customer as a "Customer" you can't be successful in the business. That's why many new car dealers should stay out of the business. They just don't relate.
Do you see local state or federal governments regulating the sale price of BHPH cars?
That's the single even that could devastate the industry. Our national leadership is the most liberal we've had in a hundred years. We could see abuses in other industries like check cashing or mortgage abuse that would spill over. That's why dealers and in particular all BHPH dealers need to be active in their state associations. It would really hurt the consumer also. They desperately need the transportation and an opportunity to rebuild their credit. The absolute reverse of this is how the poor get credit in Brazil. The government maintains a "bad pay" list and if you are on it you can't buy anything on credit. Here, if you've got 5 repos and a big down payment you're going to get put in a car.
If a person has bad credit how do you suggest they improve there credit? What advice would you want to give that person?
Don't buy what you want. Buy what you need and try to live beneath your means. That's true if you are making 24,000 a year or 24 million a year. If you can't make a payment on time call the finance source and communicate with them. Don't let them call you. And it you make a promise keep it. If nothing else, show up with something. Talk is cheap, if your payment is 200 and you can't pay it today pay $50. Most people want to help. Get some type of savings or reserve built up for a rainy day. Guess what, it rains more on uneducated people that it does on people with premier job skills. That's the next part of the message; try to raise yourself up by taking a junior college or vo-tech class.
If a person has just declared bankruptcy and they want to buy a vehicle, what do you suggest they do?
Go to a BHPH dealer. Be upfront. Get the car checked out before you buy it. Insist on some type of a warranty. What you really don't want to do is file bankruptcy and then get in a bad car that you can't afford the repairs on. Then you're in a lot of trouble.
Can you please name a few ways to improve your credit?
Pay on time. Try to owe less each month. Don't get enslaved with credit card debt.
Should a consumer run there own credit report before they purchase a used car?
Probably a good idea. An even better idea is to go to a credit union and get approved first so they can pay cash for the car.
How many credit reports should a consumer run before they purchase a used car?
Be in control when it comes to your credit report. Don't let a salesperson shop your credit all over town without you or the dealership that they work for knowing. If you get 15 inquiries in a week your credit is going to be hurt. The credit rating companies have programs to try to reduce the negative impact of "shot gunning" as it called, but it doesn't always work.
Why do people with bad credit have to pay a higher interest rate?
Because the good have to pay for the bad. The lender has more risk. BHPH dealers run a 50% default rate. That's a hell of a number!
If your divorced and as a result of that divorce have bad credit, what tips would you offer the consumer on how to obtain a loan?
Get a relative with good credit to help you get one loan that you absolutely pay right on time.
What is more detrimental to credit scoring, a credit card account that has been suspended (with consistent payments since), or an active account with a balance close to the limit?
I don't know the answer to that one.
What questions should the consumer ask the BHPH dealer when they walk into the car dealership?
I think a really good approach is to remember that the customer needs a good car mechanically. The customer needs to focus on that. Can they get the car checked out by their own mechanic? What's the warranty? What's the warranty if the dealer isn't in business? The customer needs to thinking about the vehicle in terms of transportation and its cost, including major repairs. If you're poor think about what you're doing and what this vehicle really needs to do to be a success. If you're rich, buy a new Corvette to make you "feel" young. The point is "poor people need to think" and only the rich or the foolish can afford to make decisions based on "feelings". By the way, the rich got rich thinking and through education. The foolish will lose everything anyway and always. That's where you don't want to be. Another good question to ask is if the customer can take the paperwork and have it reviewed before they sign it. If the dealer says no, get out of there.
Thank you Julian Codding. Reliable Motors