NFA Finance

Most people ask the wrong question.

They’ll call me and say:

“How much money do I need to start a Buy Here Pay Here dealership?”

The truth is, the amount of money you need depends on how you plan to operate.

I’ve seen people start with very little.

I’ve also seen people burn through hundreds of thousands of dollars.

The real question isn’t how much money you need.

The real question is whether you understand the business you’re getting into.

Most people think Buy Here Pay Here is a car business.

Some realize it’s a finance business.

After 25 years in the industry, I’ll tell you what it really is.

You’re in the collection business.

The car just happens to be the collateral.

That’s the part most people don’t understand.

Let’s say you buy a vehicle for $4,000.

You spend another $1,000 reconditioning it.

Now you’re into the car for $5,000.

You sell it with $1,500 down and finance the balance.

Sounds great.

Except you don’t get your money back immediately.

You get it back over time.

If the customer pays.

That’s where Buy Here Pay Here becomes very different from traditional retail.

In a retail dealership, the sale is the finish line.

In Buy Here Pay Here, the sale is the starting line.

Now you have to collect.

You have to manage accounts.

You have to deal with late payments.

Broken promises.

Vehicle issues.

Life situations.

And sometimes repossessions.

The dealers who understand collections usually survive.

The dealers who focus only on selling cars usually struggle.

So how much money do you really need?

If someone called me today and wanted to start a small operation, I’d tell them that $50,000 to $100,000 is a realistic starting point.

Not because that’s the magic number.

Because mistakes happen.

Cars break.

Customers stop paying.

Unexpected expenses show up.

You need enough capital to survive while you’re learning.

More importantly, I’d tell them to start small.

Five cars.

Ten cars.

Learn how to buy inventory.

Learn how to structure deals.

Learn how to collect payments.

Learn how to manage customers.

Then grow from there.

Too many people want a 100-car lot before they understand how to manage ten accounts.

That’s backwards.

The best Buy Here Pay Here operators I’ve known weren’t necessarily the best salespeople.

They weren’t always the best marketers either.

They were disciplined.

They understood people.

They understood collections.

And they protected their cash flow.

At the end of the day, Buy Here Pay Here can be an incredible business.

But don’t fool yourself.

You’re not just selling cars.

You’re building a portfolio of accounts.

And if you can’t collect, none of the rest matters.

That’s why after all these years, I still tell people the same thing:

You’re really in the collection business.