CarHop opened its first dealership in Lincoln, NE in 1996. Since then we have continued to grow by helping good people with poor or no credit get dependable transportation. Today, we have locations in 13 states and help our customers drive more than 40 million miles each month.
The following information concerning the Buy Here Pay Here industry, how CarHop does business, and who our customers are, is intended to provide you with information regarding CarHop’s place in the industry and how we work on behalf of our most valued people: our customers.
CarHop is in an industry often referred to as Dealer Financed or Buy Here Pay Here. Buy Here Pay Here refers to a part of the used vehicle industry in which dealers finance the vehicles they sell, either themselves or through related finance companies. This is in contrast to new and used dealers that sell used vehicles which are financed through outside sources such as banks, credit unions or other financing entities.
Buy Here Pay Here dealers are unique in many ways:
According to a report by Manheim Auctions, there were over 250 million cars on the roads in 2009. Manheim estimates that there are 80,000 total businesses participating in the used vehicle industry. In addition, there were 36.9 million used vehicle sales by dealers in 2010 ($327 Billion in sales) and almost 30 million additional private party sales, according to CNW Marketing Research. CNW estimates that consumers have over 56,000 auto dealerships to choose from in the US (37,700 independent used dealers, including Buy Here Pay Here, and 18,600 new car dealerships). Buy Here Pay Here consumers clearly have a multitude of shopping choices when they decide to purchase a vehicle.
According to Experian Automotive, Buy Here Pay Here represents about 24,000 dealers, with approximately $24 billion in annual originations and 1.8 million contracts covering about 10% of the total auto financing market. This suggests that the average dealer in a very fragmented industry sold just 6.25 vehicles a month. Assuming 1.8 million sales is correct (other sources have higher Buy Here Pay Here sales estimates), the top four Buy Here Pay Here companies combined represent about nine percent of the total volume in the industry (or less than one percent of the total auto finance market). The size and fragmentation of the industry provides customers in towns of every size numerous options when purchasing and financing a used vehicle.
The overwhelming size and diversity of the used vehicle sales and financing industry provides Buy Here Pay Here customers with access to a broad spectrum of information on pricing and financing options. This enables the vehicle purchaser to make informed choices based on information from thousands of automobile dealer sites, vehicle valuation sites like kbb.com, and hundreds of sites listing individual vehicles for sale, like Craigslist, AutoFinder.com® and local newspaper websites.
The typical used vehicle shopper (including the Buy Here Pay Here customer) is a sophisticated vehicle consumer. According to one source, 58% of used vehicle shoppers used the internet and spent an average of seven hours online before buying. In fact, fully 43% of used vehicle shoppers researched pricing online (Source). For the Buy Here Pay Here shopper specifically, an AutoTrader.com survey showed 81% of Buy Here Pay Here customers did “some” or a “great deal” of research before purchasing.
With over 24,000 Buy Here Pay Here dealers across the country, you will find many different ways to operate a Buy Here Pay Here business. CarHop, for its part, tends to work with customers who have more limited incomes and lower available down payments than most dealers. Thus, we tend to sell older vehicles that are affordable to these customers which can be financed over shorter terms.
As in every industry, there are always some ‘bad’ actors that are spoilers for the vast majority of ethical companies; but CarHop, like most Buy Here Pay Here dealers, understands that our success is primarily based on our customers’ success. As described below, CarHop works hard to make the transaction understandable, affordable, and successful for the customer:
While we cannot guarantee that anyone’s credit score will improve, our research supports the fact that we provide our customers with a chance to improve their credit through reporting their payment history (both good and bad), and with better credit comes great life-changing opportunities.
Our customer is someone who often has trouble getting credit from a bank or finance company due to low or no credit scores, past bankruptcies, repossessions, or delinquent accounts. Many of our customers have been turned down for financing elsewhere – deemed not to be an acceptable credit risk by banks and other finance companies. CarHop understands this risk and works to give more customers a chance to drive, resulting in significantly higher credit losses for the company than experienced by those financing prime, near-prime or traditional sub-prime credit. The lack of good credit, or any credit, limits our customer from the kind of options many people take for granted. According to Kiplinger.com, consumers with bad credit can pay up to 143% more for auto insurance, pay higher rent on an apartment, and pay thousands more over their lifetime in higher interest costs. Additionally, they have limited choices for cell phones (36% of our customers rely on pre-paid cell phones), pay higher deposits for utilities or can even be disqualified for a possible job. A 2010 study by the Society for Human Resource Management found that 60% of employers surveyed used credit checks in their hiring decisions.
According to “Pursuit of the Dream: Cars and Jobs in America,” a report by the Annie E. Casey Foundation, 88% of Americans drive their cars to work, with two-thirds of new jobs located in suburban areas away from public transportation systems. The report goes on to say, “A car can be a critical factor in getting and keeping a job and moving up the career ladder toward financial independence. Lack of access to a car creates serious difficulties for parents who juggle work, errands, transporting children to school, child care and other activities. Moreover, lower prices and a better selection of groceries, household items, and other services often are located in the suburbs. Cars make commuting at night safer and decrease the vulnerability of families during emergencies. Cars are also important for building other assets – Studies show that low-wage workers with cars are more likely to be homeowners than those without one, perhaps because car owners have a wider choice of locations for affordable, safe housing” (emphasis added).
Below we have identified some specific items from various CarHop customer surveys conducted by third party researchers, through surveys at CarHop stores, or from customer data.
CarHop tries to find a solution with a vehicle and payment that is affordable, given each customer’s budget situation. Obviously, we can’t help everyone and we say “no” when it doesn’t make sense for the customer or the risk of non-payment is too great. It is very difficult to predict future payment performance for specific customers, so we do our best to reduce that risk and work with each customer as best we can throughout the term of their financing.
With locations across America, our customers have many different backgrounds and needs. Be it a family in a large city with no public transportation near work or home, or a single mom in a small town with a long commute and no other family support for her children, We Help People Drive®.
This means we try to help as many people as possible to not only get a dependable vehicle, but also a chance to improve their credit… and, with improved credit comes life changing opportunities. But, we also say “no” or “not now” when it doesn’t make sense for the customer because we want our customers to succeed financially and not end up in a worse situation.
Getting to work, getting to school, finding a better job, or being approved for a new home or a brand new car are just a few of the real examples of how we have helped change the lives of our customers. These are the “Success Stories” that our CarHop sales associates celebrate with customers every day, for example:
Visit one of our stores and you will find the walls decorated with dozens of letters from our customers. We are proud to have earned their gratitude; their success is what drives what we do every day. Our customers say we change their lives and lend a hand when they need it the most. We want to get them on the road and driving straight towards the brighter future that they deserve. That’s a tradition we’ll never change.
*See dealer for copy of limited warranty.
**See dealer for details.