The industry is in a state of transition and dealers are uncertain about the best way to move forward.
Take the issue of whether or not to finance their own sales.
Michael Darrow, owner, The Auto Traders in Durham, N.C., said about 40 percent of his sales are subprime deals.
Darrow also “dabbles” in buy-here, pay-here. Lately, he’s been increasing the amount of paper he keeps for himself, doing two or three buy-here, pay-here deals a month out of 38 sales.
“The lenders have tightened up a little bit, which is where we’ve seen more opportunity for buy-here, pay-here,” Darrow said. “Now a lender says, ‘That’s a $900 fee,’ that’s when we’ll keep it in-house.”
Rex Echer, owner, The Car Shoppe, Salina, Kan., is acting like one of those finance companies.
His store used to be evenly split between straight retail and buy-here, pay-here. Now retail sales make up 70 percent of the business.
“ It’s a little safer,” Echer said.
A major issue for Echer is a lack of quality inventory.
“It’s harder to find anything with good mileage,” he said. “For the buy-here, pay-here stuff, I don’t know what good mileage is anymore. Maybe 150,000 or less.”
This drives up the recon costs.