When lending to customers with less than perfect credit, how does one balance high volume sales with the inevitable lower collection percentages & higher repossession (repo) and charge-off rates? The key to managing these challenges and increasing BHPH profit effectively lies in leveraging an advanced Dealership Management Software (DMS), such as Deal Pack, which offers comprehensive bookkeeping accounting software solutions for auto dealers along with industry leading Collections software.

The Balancing Act: High Risk, High Volume, and Collection Challenges

BHPH dealers often face a dilemma: they can increase sales volume by approving more high-risk deals, but this strategy can lead to higher repo and charge-off rates. This delicate balancing act requires careful financial management and robust tracking systems. High-risk customers are more likely to default on their payments, leading to increased repossessions and charge-offs, which can erode profit margins. Conversely, being overly cautious and rejecting too many deals can limit growth opportunities and reduce overall sales volume.

The Role of Deal Pack in Managing Financial Risks

Deal Pack, a leading DMS, offers the best software for BHPH LHPH used car dealerships, providing a collection of financial management tools for Auto Dealers and Finance Companies alike. These tools are essential for maintaining a balance between high-risk approvals and effective collection practices. Here’s how Deal Pack helps:

1. Comprehensive Bookkeeping Accounting Software Solutions for Auto Dealers: Deal Pack provides robust bookkeeping features that allow dealers to manage their finances with precision. Accurate bookkeeping is crucial for tracking cash flow, monitoring expenses, and ensuring that all financial transactions are recorded correctly. This accuracy helps dealers identify potential financial issues early and take corrective actions to mitigate risks.
2. Detailed Customer Tracking and Risk Assessment: One of the standout features of Deal Pack is its ability to track customer payment histories and assess risk levels. With Deal Pack, Dealers can build their own scoring models to determine not only approval/denial but also APR, required cash down, and length of contract. In addition, Deal Pack offers integrations with 700Credit and Autozoom, to further help the underwriting process.
   1. By analyzing payment patterns and customer behaviors, dealers can make informed decisions about which deals to approve. This detailed tracking also helps in setting appropriate payment terms and conditions that align with the customer’s financial capabilities.
3. Automated Payment Reminders and Collection Tools: Effective collection strategies are essential for BHPH dealers to minimize defaults and repossessions. Deal Pack offers automated payment reminders and a set of collection tools, like online payments, mobile payments, Pay-by Text, & IVR, all of which can help dealers stay on top of payments.
   1. These tools reduce the likelihood of missed payments and enable timely follow-ups, improving overall collection rates with very little overhead/labor cost.
4. Repo and Charge-Off Management: When defaults do occur, Deal Pack’s repo and charge-off management features come into play. The software streamlines the repossession process, making it easier to recover vehicles and minimize losses. Additionally, detailed reporting on charge-offs provides insights into patterns and trends, helping dealers refine their approval criteria and reduce future charge-offs.
5. Financial Management Tools for Auto Dealers: Deal Pack offers a range of financial management tools designed specifically for auto dealers. These tools include budgeting, forecasting, and profitability analysis, which are critical for making strategic decisions when talking about BHPH profit. By using these tools, dealers can better understand their financial health and make data-driven decisions that balance high-risk deals with sustainable business practices.

Conclusion

Balancing high-risk deals with high-volume sales while managing lower collection percentages and higher repo and charge-off rates is a significant challenge for BHPH dealers and finance companies. Leveraging a robust DMS like Deal Pack, which offers the best software for BHPH LHPH used car dealerships, can make a substantial difference towards BHPH profit. With comprehensive bookkeeping accounting software solutions and advanced financial management tools for auto dealers, Deal Pack empowers BHPH dealers to navigate these challenges effectively, ensuring long-term success and profitability in a demanding market.