I’m thinking about opening a Buy Here Pay Here (BHPH) car dealership. I’m curious about the startup costs, especially if I plan to handle all the financing in-house. Does anyone have experience with this?
I’m also wondering about the cash flow. At what point does the money start coming in faster than it’s going out? I guess this depends on how many cars you’re selling and collecting payments on.
Let’s say I’m aiming to sell an average of 13 cars a month, with each car retailing for around $10,000. How long would it take to start seeing a positive cash flow in this scenario?
Any insights or advice from those who’ve been in the BHPH business would be really helpful. I want to make sure I’m prepared financially before jumping in. Thanks!
Interesting question about BHPH dealerships. The initial investment can vary widely, but from what I’ve seen in the market, you’re looking at a hefty sum. 
Cash flow is definitely the trickiest part of this business model. With 13 cars a month at $10k each, you might think you’d be rolling in dough quickly, but it’s not that simple. Remember, you’re essentially acting as both dealer and lender here.
One thing to consider is the current auto lending landscape. Interest rates are up, which could work in your favor for setting loan terms, but it might also make it harder for customers to keep up with payments. And don’t forget about regulatory compliance - that’s a whole other ball game in the BHPH world.
From what I’ve gathered, it could take 18-24 months to see consistent positive cash flow, assuming you’re managing defaults well and keeping your reconditioning costs in check. But every market is different, so your mileage may vary.
Have you looked into floorplan financing to help with initial inventory costs? That could potentially help ease the upfront burden a bit.
Hey there, I’ve got some experience with BHPH dealerships, but from the customer side. From what I’ve seen, it’s a tough business to get into. The initial costs can be pretty steep - you’re not just buying inventory, but also setting up all the systems to handle in-house financing. And that’s not even mentioning the property costs.
Cash flow is definitely the tricky part. Even if you’re selling 13 cars a month at $10k each, you’re not seeing that money right away. Most customers are making small weekly or bi-weekly payments, so it takes a while for that to add up. Plus, you’ve got to factor in the inevitable defaults.
I’d guess it could take a couple years before you start seeing real positive cash flow. And that’s assuming everything goes smoothly, which it rarely does in this business. You might want to talk to some actual BHPH owners or maybe even work at one for a while before jumping in. It’s not an easy business, but I guess it can be profitable if you do it right and have enough capital to start with.
Starting a BHPH dealership isn’t cheap. You’re looking at $500k-$1M minimum to do it right. That covers inventory, lot lease, software, staff, and working capital. The real kicker is cash flow. Even at 13 cars/month at $10k each, you’ll be cash flow negative for 12-18 months easily. Why? You’re fronting 100% of the car cost but only getting small weekly payments back. Plus, expect 30-40% of loans to default. It’s a volume game - you need 150-200 active loans before cash flow turns positive. And that’s if you’re ruthlessly efficient with repo and resale. This business is all about managing risk and having deep pockets to weather the startup phase. If you don’t have 2 years of operating expenses banked, don’t even start.