The risk management process is an inherent part of the BHPH industry, yet surprisingly few dealers have a solid procedure in place. There are a wide variety of ways to handle risk management, but most of them are not specifically designed for buy here pay here dealerships. There is a notable exception, however, and it’s one that is changing the way dealers approach risk management. AutoZoom offers risk management and underwriting software that is a game changer for many car lots. BHPH Marketplace spoke with AutoZoom founder and owner Scott Carlson about what makes this service so unique in the industry.
The first thing that sets this risk management SaaS company apart is that Carlson is not simply a “numbers guy.” He has more than five decades of experience in the BHPH industry going back to his family’s dealership, which is still successful today.
“When I was young, we were struggling,” Calson recalled. “My father took $500 and started a buy here pay here dealership… When I left his dealership, after working for him for years, I went into business for myself. In 1988, I got into indirect lending, which was just getting started at the time. Over time I built my way up to 50,000 accounts.”
Scott Carlson didn’t stop there. Clearly possessing the same entrepreneurial spirit as his father and with his strong background in subprime, he formed AutoZoom. Scott isn’t the only member of the AutoZoom team with a practical background related to BHPH auto sales – co-founders and partners in the company also have real world experience in the subprime auto industry.
“AutoZoom was built by a team that knows the nature of the dealers,” Carlson stated.
As such, Carlson and his team understand the difficulties BHPH dealers face while seeking the right risk management process. When most BHPH car dealership owners first start their businesses, they take a very hands-on approach, building from the ground up. Those starting a BHPH dealership often handle customers themselves, and admittedly some have a special knack for vetting potential customers. As the business grows, however, it becomes increasingly difficult for one person to handle every customer and recall their reasoning in every case. Such an instinctive talent for recognizing customer risk levels is nearly impossible to teach to new sales people and more importantly, it provides no records of how a decision was reached.
A risk management system can change all of that.
“When you get into the BHPH business, you’re getting into the risk business, whether you realize it or not. As you grow your dealership, you move into risk management,” Carson explained. “Scoring brings order to the chaos,” he added. “It offers data that can be referenced later in the validation process… Dealers can see what they’re doing that works, and what they’re doing that doesn’t.”
He continued to share that “if a dealer wanted to, for example, find repossession rates and capital lost based on a range of scores, then calculate at which score range they should focus to maximize sales and reduce losses, how would they go about that? For a lot of dealerships, it would involve pulling huge numbers of files and interpreting the data. If they’re using AutoZoom, they can do it with a couple of mouse clicks.”
AutoZoom offers a back-to-basics approach, quickly and easily generating graphs and taking all of the guess work out of dealership risk management. The program allows BHPH auto dealers to quickly determine where they are risking the most capital, making the most sales, and at what rate and age the most repossessions occur. With a wide array of filters, BHPH dealers can see information depicting different time frames and criteria to gain a clear understanding of how their entire business or any single location is performing, as well as where their greatest strengths and weaknesses lie. It’s an incredibly valuable tool for anyone in the buy here pay here business. Dealership using AutoZoom usually see an increase in profits between 5 and 10 percent, but that number can be as high as 20 percent.
“A lot of dealers believe their method works fine and they understand their market, but they are surprised when they see exactly what’s happening and where they can do better,” Carlson stated. “Often dealers have no clear idea what score range they are selling the most vehicles in.” This is why AutoZoom partnered with Hudson Cook – to create a vetted scoring system for each dealership. If a legal question should arise, such as how dealerships can prove that they are not taking advantage of or excluding any group of people, dealers can rest assured that the data their risk management process is based on has already been examined and approved by legal professionals.
In addition, having a risk management system and alternate scoring process built specifically for the BHPH industry allows dealerships the opportunity for growth. Too often dealership owners and general managers who have previously relied on their own insight and judgment of character find it impossible to ever truly delegate the work to others. There comes a point at which the dealership simply can’t take on any more business and the growth begins to stagnate. Using a risk management system driven by data versus human interpretation makes it easier to delegate responsibilities without losing profit thereby allowing a dealership to grow and to grow more quickly. In fact, AutoZoom can help BHPH dealerships improve sales and profits by taking as much as 80% of the strain off of the shoulders of owners and general managers.
“It’s a lot easier to expand a data-driven business than a personality-driven business,” Carlson said. “And if you’re not growing, you’re dying.”
Understanding the needs and problems faced by many dealerships is not the only benefit AutoZoom’s years of experience provide. Their data collection is key and is vital with both the risk management process and alternate credit scoring model “created with and backed up by as large a data set as possible.” They continue adding to their data daily and according to Carlson, they “now have data on loans in excess of $20 million.”
With AutoZoom, the risk management system is customized to each individual dealership. There are more than 30 questions each dealer is asked concerning capital structure, risk tolerance, market niche, repossession rates, and even future operating plans. The company works with a dealership’s specific needs to improve upon or reconfigure current practices that results in deal structuring to better fit customers with different levels of credit worthiness and increase profitability. Knowing all dealerships face different issues, the only aspect of the AutoZoom system that is the same for all dealers is the program’s intuitiveness, accessibility, and cost effectiveness.
AutoZoom is so simple to use it can be learned in less than a day and the it costs far less than other alternate scoring and risk management systems all the while providing data and insight from decades of experience. If a user has any questions, there are hundreds of information icons throughout the interface that provide explanations, and AutoZoom offers unlimited 24/7 support. Even the loan applications are so easy that someone who has never worked as an underwriter before can master the process in a single day. There are 18 sections, each with five clickable options and understandable explanations provided by Hudson Cook. A user only needs to select the most fitting option in each section to receive a score. Thanks to AutoZoom’s accessible coding and format, the program can be used on any device from a dealer’s office desktop to their tablet or smart phone.
Risk management is an undeniable part of BHPH auto sales, but with AutoZoom, it doesn’t have to be a difficult or intimidating one. Dealerships can benefit from decades worth of data and a customized format to improve deal structuring and risk management for optimum profits. Contact AutoZoom online or call (888) 493-6891 to learn more.