Hey everyone. I need some guidance on figuring out how much a buy here pay here lot is worth. There’s this BHPH business that might become available soon and I want to make an offer but I’m not sure how to calculate what it’s actually worth.
The current owner is thinking about selling in the next few years and I want to be ready with a solid proposal. I’ve got some background working at regular car lots and know the used car business pretty well, but the financing side of BHPH is new territory for me.
I’m hoping to maybe work with the current owner for a while to learn the ropes before taking over completely. Does anyone have experience buying this type of business? What should I be looking at when trying to determine a fair price?
Man, that’s a complicated deal you’re looking at. I know a guy who bought into a BHPH a few years back and he said the hardest part was figuring out what all those outstanding loans were actually worth. Like, people owe money on paper but how much are you really gonna collect, you know?
One thing he mentioned was looking at their GPS tracking and repo systems. Apparently that stuff is expensive but pretty crucial for the business model. If they don’t have good tracking on their cars, that’s a red flag because repos get way harder.
Also heard you gotta be careful about inheriting any sketchy lending practices. Some of these places push the legal limits on collections and if you take over, you might be stuck dealing with complaints or regulatory issues from before you even owned it.
The working with the current owner idea sounds smart though. This isn’t the kind of business you can just jump into without understanding how they handle the day-to-day stuff. Different states have different rules too, so what works in one place might not fly somewhere else.
Honestly not sure how you’d even put a number on something like that. Seems like it would depend a lot on the local market and how desperate people are for financing in that area.
The timing aspect here is actually working in your favor. Since the owner isn’t selling immediately, you’ve got time to really dig into the numbers instead of rushing into a valuation.
What I’d focus on is understanding their customer acquisition costs and lifetime value metrics. BHPH operations live or die on repeat customers - not just the same car cycling through repos, but actual customers coming back for their next vehicle after completing a loan. Places that build genuine customer loyalty tend to have lower marketing costs and more predictable revenue streams.
Another angle worth exploring is their down payment structures. Dealerships requiring higher down payments typically see better collection rates and lower repo costs, but they also limit their customer base. There’s a sweet spot there that varies by market demographics.
With interest rates where they are now, the financing spread might not be as attractive as it was a few years ago, especially if they’re competing with credit unions or online lenders for near-prime customers. But the subprime space is still pretty underserved by traditional lenders.
Honestly, working alongside the current owner for a while before buying sounds like the smartest approach. You’ll get to see seasonal fluctuations, understand their vendor relationships, and figure out which parts of the operation actually drive profitability. That hands-on experience will be worth way more than any spreadsheet analysis when it comes time to negotiate a price.
BHPH valuations are tricky because you’re buying two businesses in one - the car lot and the finance company. The real money isn’t in car sales markup, it’s in the loan portfolio and repossession cycle. You need to analyze their average loan terms, default rates, and how many times they flip the same car through repo and resale. A well-run BHPH can sell the same vehicle 3-4 times over its lifetime. Key metrics to examine: monthly payment collection rates, average days to repo, reconditioning costs, and legal expenses for collections. The loan portfolio is an asset, but it’s only worth what you can actually collect. Don’t just look at outstanding balances - dig into payment histories and borrower profiles. Also factor in regulatory compliance costs, which vary significantly by state. Some states have caps on interest rates or require specific licensing that affects profitability. The physical inventory is less important than at regular lots since these cars cycle through quickly. A BHPH pulling consistent monthly collections with low legal costs is worth a premium.