It’s a 70 billion dollar market today, and growing rapidly. What makes the buy here, pay here business so appealing and successful? Profitability. Money is made on both the front and the back end. Those who succeed thoroughly understand what it takes to run this type of business, the type of customer they are targeting, and how to market effectively to them.

Recognize its a lending business, not a car business

In general, buy here, pay here lots provide a community service-they offer transportation to thousands of people who can’t get a vehicle through traditional means. The reality is this service is nothing more than creative consumer financing with one goal: to get as many people as possible paying for their vehicles on a weekly basis. However, the main reasons these lots will often fail at this goal are 1) a lack of appropriate cash to lend, advertise, and maintain inventory with and, 2) a lack of a disciplined collection system. A successful lot requires a well thought out business plan with particular attention given to upfront cash and financial management, personnel and underwriting standards, and collection practices.

Plan on needing about $500,000 to $1,000,000 to get started. Tracking, pricing, and budgeting are critical. Hire trustworthy, honest, and friendly people, and set up good practices for underwriting. Set a stringent collection policy that is clear to salespeople and customers. Their payday should be the lots payday. End of story.

Know your target market

Who is most likely in need of lending services? What percentage of the market falls into this prospective category? What is the strategy for creating a relationship with these consumers? Start by looking at the demographics and psychographics of customers at successful lots. Isolate the top three consumer types and begin learning as much as you can about that target market—average income, renters or homeowners, married or single, communities, job types, and more. Defining the market lends itself to obtaining the most effective prospect list, and better overall marketing results.

Talk to them personally

The circumstances leading to a buy here/pay here option are numerous. Divorce, bankruptcy, and job loss are just some of the common scenarios. Often times a blanket approach to marketing to these individuals isn’t effective, because the message isn’t personal enough. Both direct mail and email marketing are extremely personal media, and are cost-effective to implement. To get on the right path upfront, go to a trustworthy data provider offering current, accurate and complete consumer information, as well as plenty of selection criteria to come up with the best possible prospect list for the lot.

John Schendt can be reached at 888-608-2875 or at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Sources: WardsAuto.com and Cardollars.com.

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