The Repairs Are Coming: Can You Say Yes

First, Captain Obvious, in BHPH one fact of life is vehicle breakdowns. Selling cars is easy enough once you have inventory and you attract the customer. Coming off COVID and the increased default rate amongst larger lenders, finding vehicles is easier than it has recently been and with the deep subprime customers losing opportunity from Special Finance they will turn to BHPH/LHPH/Rental where we could see activity like we did in 2020-2021 without the price spikes.

As we know our customers are maintenance challenged for various reasons from not being very organized or were never taught they had to do maintenance (dad and mom didn’t). In many cases it is about prioritizing their money. No matter the reason, your customers have plenty of issues to deal with on a regular basis, some real, some not and some self-inflicted. The question is do you let the customer decide what to do (or NOT do) with a vehicle issue themselves or do you have a solution in place to help customers decide what to do and keep your vehicles on the road?

I have always advocated that we anticipate the problems we know customers are going to have and put a plan in place to handle the problems when they roll in. The first thing I learned about the car business, after I figured out how to get a car deal done, was that we would be dealing with the customer again. In retail sales you might want to continue a relationship with your customers. In BHPH you have no real choice. In order for more loans to be successful, our customer is going to need our help with the vehicle during the life of the note. Having a plan to receive them when they come in is good. If you say “no” to their request for help you can often find your car on the lot, or wherever it got left when the problem got bad. Impound, mechanics fees, side of the road towing, skip tracing, stripped the vehicle at a friends house are all fun endings to our collateral. If your saying “it’s your vehicle, take it to any shop” to customers all the time you can be hurting your portfolio and future sales more than you realize.

So, what to do? I have always had and encouraged other dealers to have a fullservice shop operation. I built 4 dealerships for other companies, all with shops, so we could control the expense and customer service that comes with selling high mileage rigs to maintenance challenged customers. My shops always operated similar to a franchise operation. A customer service person (service writer or porter plus) was available to screen the customers’ issues and determine next steps. There is a manager and lead technicians, equipped with a good scanner, that would understand the problems to help pinpoint the issue and full-service operation to handle any problem we encountered. All with processes and policies in place so the decisions were easier as the action heated up.

When your customer calls complaining and are told to go see Joe’s Muffler Shop down the street about their car problem, Joe isn’t worried about your note, unless he’s related to you. He wants to up sell your customer and will give them a laundry list of items he could fix. Here comes your customer “hair on fire” about the POS you sold them and the thousands of dollars it’s going to cost to make repairs.

Most dealers, if they are using Joe down the street, spend the highest dollars in this scenario. The dealer doesn’t know what is really wrong. Joe needs to make money and is charging the dealer or the customer retail for the work and the dealer is generally too busy to check up on Joe, so the repair recommended is often done at someone’s expense (usually yours) or the vehicle is left with an unpaid bill and Joe gets to sell it. Joe will also let the vehicle leave his shop knowing without that repair your collateral will not last long. I have seen outside shops work just fine, it does take maintaining a good relationship with the outside facility and routine audits of the work being performed.

If you do not have your own shop, I believe you should at least have a “service writer” type person with a good scanner and computer so they can determine best course of action for your customer and control what work is done and by who. This role can be someone with some experience in repairs to field all service issues (including body damage) and do some basic diagnosis to discuss with the shop(s) down the street. I would even have my service writer deal with all our service customers first, at our dealership, get the car to us (I suggest a Roadside Program you can offer like AAA for towing), take control of the process and send it to the shop we choose. This way our customers only hear what we need them to hear from us. We can have other things checked to ensure our vehicle isn’t in danger of a maintenance failure when we can solve it now. We control the expectations, ensure correct repairs and what is getting paid.

There are a lot of variables, at this stage, in the life of your loan. Do you have a service contract or warranty (reinsurance or third party), does your dealership and Joe’s muffler have a long-standing relationship, do you have a tow truck, hire out wrecker services, or offer a Roadside program third party? How experienced is your “service writer” and what else can he/she do for you? Depending on the warranty program you have, many repairs will fall on the customer to pay and most do not have the money. You should look into small loan financing from third parties like SoFi, Netcredit, World Finance, Fast Loan Advance and plenty others (web search “car repair financing”) who will loan up to $5000 to your customer for auto repair. No collateral attachment, no recourse to you and you get paid for the work. If not that consider side loans for the best customers or do a 50/50.

How you handle repair issues is as important as how you handle collections, they are tied together and affect your reputation and sales. Have a plan and control the customer’s expectations as much as possible. Even without a shop you can offer things like free oil changes, use the “quick” places (like TAKE 5) where the customer does not get out of their vehicle (it is a rising trend in the repair industry). Consider a mobile mechanic that will go to the customer for minor repairs and look over the vehicle if the customer is concerned but won’t keep appointments. You need to keep your collateral rolling and making those payments. The customers will just keep them rolling until the rig stops. If you have some plans in place to help keep your collateral maintained, and have repair options you can offer, there will be more successful loans.