Glenview’s Capital Program Offers Best from Available Solutions

By Kyle Heintschel

Regional Sales Manager

Capital is the lifeblood of all buy here-pay here (BHPH) operations, and current economic conditions have made getting a cash infusion an expensive proposition. As the federal reserve has increased interest rates, the cost of borrowing money has gone up.

Given the inherent risks associated with the subprime and deep subprime automotive finance business models, capital has always been more challenging to secure and expensive than almost any other business financing.

Because the BHPH dealer has assets (vehicles) to leverage, several capital acquisition options exist. However, they are expensive, and there are numerous stipulations. Dealers selling 25 units a month will need more than $2 million for just vehicle acquisition. Cash outflow is fast, and the money returns far more slowly in weekly, bi-weekly or monthly payments.

Self-funding is an option and the most cost-effective method. Dealers will have to access capital from savings, investments or loans from family, friends, or investors. The risk is loss of investment, and if not enough capital is available through unexpected events such as weather or accident, it will immediately lead to an inability to purchase new or recondition returning inventory.

Banks can provide lines of credit and small business term loans to assist with portfolio growth and have traditionally been among the least expensive. Banks have also been known to be selective in who they provide capital. They typically have more strict underwriting standards than other BHPH capital providers, require many years in business, audited financial statements, and strong net worth owners and seasoned portfolio performance. They can quickly end the relationship, as many dealers discovered during the 2007 housing crisis and subsequent Great Recession.

Bulk sales of notes is a common practice for BHPH, especially those that would like to maintain a limited staff and prefer not to expend capital resources on collections and service operations as the portfolio grows. The key benefit is immediate access to profits and the ability to fund future deals. The biggest concern for dealers is the loss of month-over-month cash flow from existing customer payments, not to mention the loss of repeat and referral business that comes from having a long-term relationship with the client. This is less of a concern than it used to be. Most dealers have multiple “contactless” ways for their customers to make payments. If the note buyer has poor customer service, especially with collections, it can lead to brand issues for the dealership. The consumer associates poor customer service with the dealership regardless of who now owns the finance contract.

Glenview Finance provides what most in the industry refer to as a Payment Streaming program, though our program is different, and we like to refer to it as “Streaming on Steroids.”

Typically, with a streaming program, dealers sell off a portion of payments only and give up any residual monthly cash flow to those deals. The capital provider manages collections during that period, but the dealer ultimately retains the customer when the payment stream has run its course.

Our program purchases the entire retail installment contract from ALL dealers with a 50 percent upfront advance. Further, Glenview continues to share 40 percent of each payment received, maintaining month over month cash flow for our dealer partners. If a retail dealer cannot find funding for a credit-challenged consumer, we step in and fund the deal. The retail dealer sells another vehicle and gets an instant return. The same goes for BHPH dealers who need access to capital. This gives them instant access to “up-front” cash flow and back-end profit as the contract matures. We handle all the collections and, if necessary, repossessions. Dealers receive an upfront advance and get their portion of the payment from Day 1 with no pool or performance metrics that need to be obtained. Ultimately, they would receive 90 percent of the principal and 40 percent of the interest for all contracts that pay in full.

Our hybrid point-of-sale program offers the best of all the models. We’re a partner with a vested interest in the success of the contract. We understand the challenges and opportunities of the retail marketplace, but we also have unrivaled automotive finance expertise. We have a shared interest in having satisfied customers who pay on time for the life of the loan.

If you want to learn more, call 877-288-0307 or email us at sales@glenviewfinance.com.

Focus on the Fundamentals: Collections Key in the Market

Used car values slumped nearly 7 percent in the third quarter of 2022, according to Cox Auto, and at the same time, consumers are being stretched thinner when it comes to their monthly budgets. It doesn’t portend well for buy here-pay here dealers, who may have gotten used to being able to repo a unit, only to have it worth more than when they sold it.

Everyone knew that wouldn’t last, but as Federal Reserve is rapidly increasing interest rates and capital is more expensive, it’s a wrong time to see increasing late payments, reductions in recency, and defaults resulting in repossessions.

Cox reported last month that after two years of declines, the amount of repossessed vehicle volumes flowing into wholesale channels is expected to tick up to 1.2 million in 2022 and remain at that level in 2023 before climbing to 1.3 million in 2024 and 1.5 million in 2025. It may mean greater selection for that BHPH unit in the future but will mean some pain for many, at least in the short term.

One thing we’ve learned from decades of experience in automotive finance is that you can only control what you can control. You must respond, but it shouldn’t become all-consuming. Now is the time to focus on what matters.

Because we partner with dealers and share the many risks that come with the BHPH business, we have a vested interest in their success. Rising fed rates have made capital more expensive, but because of our unique program (*See details below.) we have not had to change our program at all.

What we have done is help dealers with their underwriting. We work with you to make every deal a success. It’s an unattainable goal; we understand that but we do all we can to keep accounts current and the customer in the car.

Collections are critical in our business. We insist that our collectors develop relationships with the client. We are firm but work with customers when practical and when we see honesty and sincere effort.

In this market, consumers, especially the BHPH customer, need their vehicles. It’s the difference between having a job or losing one. It’s the difference between getting to a doctor’s appointment or missing it. We make sure that YOUR customer understands we are on THEIR side. We make sure the customer remembers who sold them their vehicle and that we represent you, so you get the repeat and referral business.

We constantly train our collectors. Our collections managers carefully review the data and point out each collector’s strengths and weaknesses. They are incentivized based on solid performance and hitting their goals.

Despite headwinds in the marketplace, there is calm to be found by partnering with a leader in the BHPH Capital industry. We share your goals because your success directly affects ours.

* Glenview Finance Program Details

• Advance: 50% of the amount financed/current principal balance

• Dealer Payment Share: 40% of every payment collected.

• Once paid in full, the dealer receives 90% of principal and 40% of the interest.

• Amount Financed: Maximum of 250% LTV (Based on NADA Clean Trade with a Value >$3,000)

• Term: 48 Months (54 with Glenview Gap and Warranty)

• Age of Vehicle: No Restrictions

• Mileage: No Restrictions

Who Should Consider Using a Third-Party Capital Provider to Grow Business, Increase Net Profit

Kyle Heintschel,

National Sales Director

Glenview Finance

There’s always been a debate among buy here-pay here dealers as to whether to sell their finance contracts to a third-party capital provider, or hold on to the notes, assume all the risk themselves, and reap the financial rewards providing their customers pay as agreed.

There’s a lot to be said for operators holding notes who have enough capital on hand or can easily access the capital they need to grow their portfolio, absorb expected and unforeseen losses, manage a collections team, handle delinquencies, charge-offs, compliance issues, human resources, and the list goes on.

There are, however, many dealers who need steady access to capital, and don’t want to enter a complicated financial arrangement with a third party who provides a line of credit at high interest rates based on their portfolio performance.

Capital providers are obviously in business to create wealth for their enterprise. Providers that don’t ensure both their company and the dealers they serve are profitable, however, do a disservice to the industry, and will ultimately get hit by poor reviews from dealers and consumers alike, and potentially draw scrutiny by regulators, as well they should. Every deal should be good for the dealer, the consumer, and the capital provider. While the process can be a game of brinksmanship, it’s not overly complicated.

When finding a partner to provide capital for finance contracts, dealers should look at every aspect of the agreement, run the numbers for and anticipated time they expect to need cash, have their general counsel look over the contractual agreements, and closely scrutinize the policies and procedures that govern all aspects of the deals including but not limited to: marketing and advertising; disclosures; underwriting; collections; buy- backs; and of course GPS and insurance requirements. Dealers should be thorough, ask a lot of questions; and make sure the program meets their immediate needs, and can sustain their desired future growth.

So, who should consider a program like that provided by Glenview Finance:

• Dealers who want to grow, and need access to capital

• Those who don’t want to be burdened with hiring and managing a team of collectors

• Dealers looking for another avenue to fund their subprime turndowns, or highly discounted contracts

• Those looking to infuse their business with instant capital for new and existing BHPH accounts

• Dealers wanting to accelerate their profits, and maintain steady back-end cash flow

• Dealers who don’t want to make major changes to their operations and procedures to fit the demands of a third-party capital provider

• Retail dealers who understand the importance of having multiple revenue opportunities

For more information contact me anytime at (713) 478-7455 or via email at kheintschel@glenviewfinance.com