Flipping Exotic Cars Vs Buy Here Pay Here

Summary

In this insightful video, the speaker delves into the 'buy here, pay here' (BHPH) car sales model, highlighting its profitability and flexibility. By acting as their own banks, dealers can set interest rates and approve loans, significantly increasing revenue from affordable vehicles. The discussion includes strategies for building a profitable portfolio, the potential to bundle and sell notes to hedge funds, and the rising demand for low-cost cars as traditional lending becomes stricter. Overall, the video offers practical advice for entering the BHPH market and emphasizes the importance of cash flow in sustaining the business.

Takeaways

• 😀 The Buy Here Pay Here (BHPH) model allows dealers to charge high-interest rates on used cars, generating significant profits.
• 💰 Dealers prefer independence from banks, retaining profits within their business models and having more control over financing terms.
• 📈 Rapid portfolio growth is possible; dealers can liquidate assets at favorable rates without waiting long periods.
• 🏦 Loan contracts can be bundled and sold on the stock market, creating additional investment opportunities for dealers.
• 🚗 There is a strong demand for affordable vehicles, especially as banks tighten loan approval processes.
• 🙋‍♂️ Real-life examples highlight challenges potential buyers face, such as job gaps leading to loan denials.
• ⚖️ Building a solid cash flow and infrastructure is crucial for success in the BHPH industry.
• 🔄 The speaker emphasizes the importance of financing lower-cost vehicles to meet market demand.
• 🔔 Engagement with the audience is encouraged through comments and questions, fostering community interaction.
• 🌟 The speaker's personal approach to responding to viewer questions enhances credibility and connection with the audience.

Q & A

What is the buy here pay here (BHPH) business model?

The BHPH business model allows car dealerships to finance vehicle sales directly to customers, acting as their own banks. This model often involves high-interest rates and enables dealers to maintain more profit by controlling the approval process and repossession of vehicles.

How does the speaker define a successful BHPH portfolio?

A successful BHPH portfolio typically consists of affordable vehicles priced between $5,000 and $14,000. It emphasizes high-interest financing, which can yield significant returns for the dealership.

What are the financial benefits of operating a BHPH dealership compared to traditional banks?

Operating a BHPH dealership allows for higher profit retention, as dealers do not have to share earnings with banks. They can set their own interest rates, approve or deny loan applications based on their criteria, and have the ability to repossess cars if necessary.

Why does the speaker suggest BHPH dealers should focus on lower-priced vehicles?

Focusing on lower-priced vehicles helps BHPH dealers cater to a larger customer base, especially in economic downturns when traditional financing is harder to obtain. There is a significant demand for affordable cars, making it easier to find clients.

What is the significance of bundling BHPH receivables in the stock market?

Bundling BHPH receivables allows dealers to package their financing agreements and sell them to hedge funds or investment firms as a low-risk investment. This can provide additional capital for dealers to reinvest in their business.

How can dealers liquidate their portfolios quickly?

Dealers can liquidate their portfolios quickly by selling their receivables at a discount to investors, allowing them to access capital without waiting for full payment from customers over time.

What challenges are mentioned regarding obtaining traditional financing?

The speaker highlights challenges like banks denying loans to individuals with employment gaps, especially in the wake of economic disruptions, making BHPH a viable alternative for those unable to secure traditional financing.

What is the speaker's stance on exotic car sales in relation to BHPH?

The speaker appreciates the appeal of exotic car sales but emphasizes the importance of establishing a steady cash flow through BHPH operations first. Exotic cars can be lucrative, but they require significant capital and do not sell as frequently.

How does the speaker suggest new dealers approach the BHPH market?

New dealers are encouraged to start with affordable vehicles, keep their risk minimal, and focus on building a robust cash flow before expanding into higher-priced inventory.

What advice does the speaker give regarding customer interaction in the BHPH model?

The speaker advises maintaining open communication with customers and understanding their financial situations, which can help dealers make informed decisions about approving loans and managing risk.