By Tim Byrd
Tax season is upon us.
You have been working diligently for months to gather the
right inventory to make this the best tax season ever.
Let me ask you this: Do you have your own insurance
company? You know, a dealer-owned reinsurance company?
Maybe you have not heard of reinsurance. Or maybe you have
and it is just out of your wheelhouse. You don't understand it and you’re a
little afraid of something outside of your purview.
You are a Buy Here-Pay Here dealer. I am sure you have
folks all the time trying to sell you the perfect widget to solve all your
The fact is, I have been in the car business for nearly 30
years and can say with confidence that nothing related to the car business has
a greater impact and greater return on investment than a dealer-owned
Follow my logic for a moment.
The lifeblood of any BHPH operation is the collection of
payments. If your customer's vehicle is repossessed, there are no more
Every state has its own rules regarding repossession, but
you as the lender have a security interest and can repossess a vehicle without
notice if your customer defaults on the loan.
Many things can constitute a default, but the most common
reasons are not making timely loan payments and not having car insurance.
It’s well known in our industry that if the car does not
run, the customer is not going to make timely payments. And if the customer
driving around without insurance, that violates the terms of your agreement.
Mechanical breakdowns and lapsed insurance account for
about two-thirds of all repossessions. The other third is caused by life events,
over which we have very little control.
A dealer-owned reinsurance company puts you in the driver's
seat to be a better, more profitable dealer. You can position yourself to
provide solutions before problems ever occur.
In addition, your customers are collectively funding the
premium to your insurance company to cover mechanical breakdowns and collateral
protection. Collateral protection and a vehicle service contract are, in most
cases, less per month than a customer would pay for car insurance.
Collateral protection and vehicle service contracts funded
by monthly payments into your insurance company by your customers is mutually
Sounds like a great plan doesn't it? All you need is
someone who has been helping dealers manage programs like that for more than
two decades to give you the comfort level to get started.
After you see how easy it truly is, you will say what we
have heard over and over again: “I wish I had done this years ago.”
Position yourself for tax season – and every season – with
your dealer-owned reinsurance company.
Byrd is founder and president of DealerRE, with more than 25 years of
experience in the auto industry. He can be reached at www.dealerre.com or by
calling (804) 824-9533.