Dealers use their current loan contracts as collateral to borrow more money.
When an investor buys a portfolio, they buy it at a "discount" (e.g., buying $1M in total debt for $700k) to account for the high risk of default.
BHPH is a cash-intensive business. Once a dealer has loaned out all their capital to customers, they "run out of cash" but have a "portfolio of notes" (contracts). To get cash back to buy more cars, they sell these contracts in bulk to financial institutions. Key Terms in Bulk Portfolio Sales: buy here pay here bulk purchase
The primary source for 85% of BHPH inventory. Dealers buy "blocks" of older, high-mileage vehicles to keep costs low.
Calculated based on the portfolio's performance, including average APR (often 20%+), payment history, and vehicle age. 📈 The Economics of BHPH Bulk Models Feature Traditional Dealership BHPH Bulk Model Profit Timing Immediate (at sale) Realized over 24–36 months Interest Rate Market rates (low) High (20% to 29%+) Inventory Source Manufacturer/New trade-ins Wholesale auctions/Bulk blocks Risk Management Third-party bank risk Dealer/Investor risk (1:4 fail) ⚠️ Core Risks in Bulk BHPH Dealers use their current loan contracts as collateral
In the automotive industry, "Buy Here Pay Here" (BHPH) bulk purchasing refers to two distinct business actions: buying inventory in volume or investors purchasing entire portfolios of existing auto loans (contracts). 🚗 Dealer Inventory Acquisition (Bulk Stocking)
Roughly 25–40% of BHPH customers become delinquent within the first 60 days. Once a dealer has loaned out all their
Larger franchise dealerships often sell their "low-line" trade-ins (cars they won't sell on their own brand-name lot) in bulk to independent BHPH lots. Portfolio Sales (Bulk Note Buying)