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Serious Advice for Buy Here-Pay Here Dealers If a dealer is engaging in Buy Here-Pay Here operations it is imperative that the law be followed should you have to make a repossession. Avoid repossessing a vehicle unless you have secured the lien. Many BHPH dealers avoid collecting the tax, title, plate fees and the lien fee when they sell a consumer a vehicle. Often, they give the customer the title and the paperwork and expect the customer to go to the courthouse and make the transfer. That results in liens not getting filed. Without a security interest, a dealer will not be able to repossess the vehicle should the customer fail to make a payment. The lien must be secured. Illegal repossessions also occur when the consumer is not in default under the loan agreement or the consumer is not behind on loan payments. BHPH dealers cannot treat a payment less than 10 days late as being a late payment in Iowa. A BHPH dealer cannot repossess a vehicle unless a Right To Cure Notice is appropriately sent to the customer. Additionally, breaching the peace is forbidden, which means yelling, screaming, swearing or taking the vehicle over the consumer’s protests. An officer of the peace may not facilitate the repossession. Should a consumer have his vehicle repossessed, the consumer still has the right to redeem the vehicle. The BHPH dealer must provide various notices to the customer and the dealer must dispose of the repossessed vehicle in a commercially reasonable manner. A vehicle sale to a lender’s relative for less than the vehicle’s value might not be a commercially reasonable sale. The dealer must keep accurate records of all procedures and keep them in the customer’s file. Proceeds from the vehicle sale must be applied to the account balance and the consumer has a right to be notified about what was credited to the account and the remaining account balance. A BHPH dealer might not be able to collect a deficiency if the repossession was done illegally. BHPH dealers cannot charge a fee for this and a fee for that – Iowa law is specific about what fees can be charged. You just can’t pull figures out of the air or add on fees that are not permissible.

BHPH dealers must register with the Consumer Protection Division of the Iowa Attorney General’s office as creditors and must use retail installment contracts even if they are not charging interest. The maximum allowable interest rates in Iowa are 21 percent on new vehicles, 24 percent on used cars less than two years old and 27 percent on used cars more than two years old. If a dealer chooses to conduct BHPH operations, it is imperative that he knows all of the state and federal rules, laws and regulations regarding that segment of the auto industry. It would be wise to obtain legal counsel to assist in the development of a BHPH business plan. Obtaining BHPH software is another good avenue to pursue. BHPH dealers must dot every I and cross every T to ensure they are using all of the correct paperwork and taking the responsibility of preparing the required documents to protect the consumer as well as the dealer. Many BHPH dealers do not understand procedures regarding debt collection. Dealers must make themselves aware of all the necessary requirements as well. Advertising is another area that can get dealers into trouble. Dishonest advertising is consumer fraud and a court of law can impose a civil penalty of $40,000 for each violation. Training your staff is an important piece of BHPH operations. Monitoring sales representatives’ presentations is important to ensure everything that must be disclosed is disclosed. Give your customer adequate time to read and understand all the paperwork involved and make sure the customer gets a copy of all the paperwork. Make sure that your employees understand the laws regarding fraud and financing. You are responsible for their actions. Many BHPH dealers offer warranties to their customers, and the quality of BHPH vehicles has improved over the years. If you offer warranties, honor them. Satisfied customers who tell their friends and family about you as a reputable dealer will help you obtain additional business, which means additional profit. BHPH dealers do take on extra risk by extending credit to customers who might have a glitch in their credit history. If you are promising to help rebuild their credit, keep your promise.


Rent-A-Wreck Offers $1,000 Off a Franchise Rent-A-Wreck of America, a franchise company with more than 150 used car rental locations throughout the U.S., is now offering NIADA members a $1,000 discount off the purchase of a franchise. Rent-A-Wreck, an endorsed NIADA National Member Benefit Partner, has extended its commitment to independent dealers by pledging to contribute $1,000 to the dealer’s state association or the national association for every franchise sold to an NIADA member. Since 1973, Rent-A-Wreck of America has offered used car dealers a franchise they can operate at their existing retail sales lot to bring extra revenue and additional foot traffic with little additional overhead. “Our franchise brings used car dealers everything they need to become a player in their local car rental marketplace,” Rent-A-Wreck of America vice president of operations Michael DeLorenzo said. “We have financing, insurance, a global reservation system and a comprehensive and sophisticated training system that makes car rental a near turnkey opportunity for a used car dealer. “Rent-A-Wreck is a great brand with a long and successful history with used car dealers. Our franchisees who are used car dealers see the benefit of additional cash flow and profits from rentals, but also see that the increased foot traffic helps them sell more cars as well.” Rent-A-Wreck franchise owners receive access to a fleet leasing and purchase program that includes access to closed factory sales, a reservation system connected to multiple global booking channels, online travel agencies, and 1-800 telephone reservations, point of sale integration with the reservation system, a comprehensive training program in pre-open and post-open phases, a dedicated area representative for recurrent and ongoing needs, insurance and more. For more information, visit or call (469) 939-6132 to speak to a company representative.



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9/20/12 11:38 AM

IIADA Street Smart Oct/Nov 2012  

Iowa Independent Automobile Dealers Association for October/Novemer 2012