In Case You Missed This... Investors Place Big Bets On Buy Here Pay Here Used-Car Dealers - LATimes

[WillyT]

Investors place big bets on Buy Here Pay Here used-car dealers
Private equity firms are investing in chains of used-car lots, and auto loans are being packaged into securities much like subprime mortgages. They're attracted by the industry's average profit of 38% for each car sold

By Ken Bensinger, Los Angeles Times
Los Angeles Times Staff Writer
November 1, 2011
Second of three parts



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The J.D. Byrider used-car dealership in Visalia, Calif., sits amid a jumble of tow yards, hubcap vendors and vacant lots littered with empty beer cans. It may not look like much, but selling aging cars to waitresses, secretaries and farmworkers is a lucrative business. That's why private equity firm Altamont Capital Partners of Palo Alto bought the J.D. Byrider chain in May for a reported $50 million. Altamont's offices, on the 10th floor of a luxury office tower overlooking Stanford University, are 200 miles and a world away from the Visalia lot.

On a recent morning, a dozen executives could be seen huddled in a glass-walled conference room, reviewing a slide presentation on plans to buy some franchised Byrider lots. It's part of a strategy to boost profit at the 135-lot chain, which had sales of $740 million last year. Firms like Altamont pride themselves on being the smart money, identifying profitable opportunities ahead of the herd. Lately they and other investors are finding just such a windfall in a little-noticed niche of the used-car business known as Buy Here Pay Here.

These dealerships focus on people who need cars to get to work, but can't qualify for conventional loans. They sell aging, high-mileage vehicles at prices well above Kelley Blue Book value and provide their own financing. As lenders of last resort, they can charge interest at three times or more the going rate for regular used-car loans. Many require customers to return to the lot to make their loan payments — that's why they're called Buy Here Pay Here dealerships. If buyers default, as about 1 in 4 do, the dealer repossesses the cars and in many cases sells them again.

The dealerships make an average profit of 38% on each sale, according to the National Alliance of Buy Here Pay Here Dealers. That's more than double the profit margin of conventional retail car chains like AutoNation Inc. "The amount of return from these loans you can't get on Wall Street. You can't get it anywhere," said Michael Diaz, national sales manager for Small Dealers Assistance Inc. in Atlanta, which buys loans originated by Buy Here Pay Here dealers. "It's the gift that keeps giving."

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More: http://www.latimes.com/news/la-fi-buyhere-payhere-20111101-m,0,1999521,full.story

:mad:

:kick:

[gateley]

1. I don't know why, but I'm yet again shocked at the greed and

lack of caring so many people exhibit in the quest for money. It really makes me sad.

[madrchsod]

2. rent to own cars....

banks won`t loan and people need cars to get to the store and to work...

[SomethingFishy]

3. I bought my last 3 cars at Buy Here Pay Here

I got good deals, paid below blue book, I wasn't harassed, I paid no interest and all 3 cars lasted years. I'll be going back when I need another car again. From experience I'd say that they are not all bad.

[virgogal]

5. That's good to hear, I wasn't familiar with the chain.

[SomethingFishy]

7. It's not a chain, just a local BHPH place..

sorry for the confusion...

[virgogal]

12. Probably me reading incorrectly-----no problem. :-)

[girl gone mad]

6. That doesn't add up.

You think you got a good deal w/ no interest at a buy here, pay here lot?

My guess is that someone saw you coming.

[SomethingFishy]

8. Really? It's doesn't add up?

The last car I bought was a 2001 mini van. I paid 5 grand for it. 2500 up front and 250 a month till it was paid off. No interest. This was in 2007. Here I am 4 years later driving the same car.

I got a mini van that has run for 4 years without putting a dime into it for 5 grand with no interest.

Now, maybe you can take your superior intellect and explain to me exactly how I got screwed.

You know since they "saw me coming" and all...

You know maybe next time instead of calling me an idiot you might want to ask where I shopped, who the guy was, and could he help you as well. But hey you feel the need to flaunt your self-proclaimed superiority then go ahead and keep getting ripped off, while I keep buying something that "doesn't add up" to a genius like you.

[girl gone mad]

14. Sounds likt you bought at a regular used lot.

The entire business model behind buy here, pay here is making money from charging excessive interest, which is why your purchase didn't add up. These places are essentially banks, not car dealerships. It would be like saying you bought a house from Wells Fargo with 0% interest or that you took out a payday loan at 0%.

[RebelOne]

9. You lucked out or you are living in the right state.

The used car lots here in my area of North Georgia that offer buy here, pay here terms also charge 32% interest. But they are not one of the Buy Here Pay Here chains.

[SomethingFishy]

11. The place I buy is a local business not a chain..

The guy is cool, his lot is cool. I got a good deal, he made a bit of money and everyone is happy. It's the way things are supposed to work.


Of course DU is so fucking paranoid that I'm being chastised for buying local and getting a good deal. I was told "they saw you coming".

[Motown_Johnny]

13. and what happened the next week?

KIDDING!!!


>>>It was a joke<<<



sorry

[DJ13]

4. I feel sorry for anyone employed there now working under Altamont

They suck the life out of every business they get their hands on.

[Laluchacontinua]

10. Have you noticed how big money is moving into all the arenas that used to provide

a subsistence living to independent businesspeople? Used car lots, second-hand, scrap dealers, recycling etc.

Small local capital has been driven out of most of the low-capital businesses -- restaurants are one example. Very hard to compete with big capital & chains.

They want EVERYTHING & they don't want people to be able to live outside their cage.