Interview with Jason Reaves on Buy Here Pay Here Auto Sales & Dealers

In this blog post, we have transcribed the UCDP interview with Jason Reaves in written format. You can listen to the original podcast here.

Zach: Alright! Hello, it’s Zach here and we have a great guest on the podcast today for Episode #21, Jason Reaves who’s the President of Wayne Reaves Software, which is a DMS business focused on buy here pay here dealerships. He is also a subject matter expert on BHPH. Jason, thank you so much for being on the podcast today.

Jason: Sure, thank you for inviting me.

Zach: So, let’s get everything started. For those of us listening and wondering, what does your role as President of Wayne Reave encompass and how did you get into the car business?

Jason: Well, let’s start with how I got into the car business. That one’s quite easy, I was actually born into the car business. My dad had started a buy here, pay here dealership actually in 1971. So, I was actually one year old, but it was my entire life, growing up. 

I was always up at the car lot, I was always interacting and doing different jobs and by the time I’d graduated high school and gone onto college, we had already started the software company. And so for years after that, I kind of did a hybrid role between the software business directly and the day to day operations at the car lot. 

And then now as President of Wayne Reaves, it’s an interesting role. We just guide the company and hopefully, make the right decisions and interact really with partners such as yourself and make sure the dealers are served the best that we can.

Zach: Agreed, that’s awesome and it’s been a rollercoaster of a year, it’s not even finished yet. Talk to me about what you’ve observed from your lens when it comes to buy here, pay here sales during the pandemic.

Jason: Yeah, the buy here, pay here sales have been really interesting. You know starting out late March-early April, everyone out there was just holding on and bracing for the worst not knowing what was gonna be coming but then the way that it’s turned up, it’s really been not nearly as bad, and in some cases, it’s been a really good year for buy here, pay here dealerships and I expect that to continue on into 2021.

Zach: So, from your perspective, how has technology, for instance, software evolved the way buy here, pay here dealers operate their stores?

Jason: I think most people know that my dad hired people to write software for his dealership back in the late 70s and so I’ve never known calculating anything by hand or anything but the business throughout the next 30 years really stayed pretty stationary it was just the calculations, the reports, the paperwork, the compliance add and that’s really kind of where ‘buy here, pay here’ stayed at that point in time. 

But really in the last 5,7,8,9 years, it’s changed tremendously. The automation add of the ‘buy here, pay here’ has allowed them to grow much bigger, become much more efficient in their dealership than just using the software as a tool, that was just a manual point to speed up a few operations. The software now speeds up every part of their operation.

Zach: I’ll often hear from independent dealers maybe at a trade show who do retail but not doing ‘buy here, pay here’ that they want to get into ‘buy here, pay here’ because it could be lucrative. What are the most common mistakes you see a new ‘buy here, pay here’ operator make?

Jason: So the single most common mistake is not being prepared financially. And it doesn’t really matter what their budget size is. I mean you could go in with 50 thousand, you could go in with a 100 thousand, you could go in with 20 million. 

If you’re not really thinking about the cash flow and how that’s going to go for the next 90, 120 to even 180 days, that’s going to be the biggest mistake you’re going to make. 

When we first got into this business, I remember when I was selling cars back at my dad’s car lot, it was – there’s something called ‘in the street’ which is where the ‘buy here, pay here’ dealer gets enough out of their down payments to basically break even and start moving on so they can buy another car and 90 days was the right time frame at that point in time. 

And now, it’s in most cases, it’s a year. So, you’re gonna have to be well funded and really just well-planned. So that’s the largest mistake I see and the second one is buying the wrong cars. You know a cheap car isn’t always the best car, because it’s got to be able to outrun the note. 

Zach: So, ‘buy here, pay here’ is becoming more compliance-driven, whether it’s battling with the Consumer Financial Protection Bureau or litigation on a local level. What are some of the best practices from a compliance standpoint you would recommend for ‘buy here, pay here’ dealers?

Jason: So, I think the best thing whether it’s ‘buy here, pay here’ or non-’buy here, pay here’, the best thing I always tell car dealers is listen to that voice in the back of your head and if there’s any doubt at all, if you’re thinking, “Well I bet I could pull a fast one here, I bet I could do this and take a shortcut” that’s probably the wrong answer, because with attorneys, with government agencies, there just are no shortcuts. 

You have to be well thought-out in everything that you do from the collection side to the repossession side to the sale side. And most importantly, not only do you have to do that, but you have to have your employees trained because your employees are never gonna get sued, they’re never gonna get fined, they’re never gonna have their license revoked, it’s all gonna come back to you.

Zach: So, what do you think about new models in automotive, like subscription and online dealers that are making headlines in the retail world, do you see that trickling down to ‘buy here, pay here’?

Jason:  I don’t think I see it at this point in time, to be honest with you. I think it’s a model that obviously they’re trying on the retail side but molding that model into a ‘buy here, pay here’ side; I think it’s hard enough to mold it into a regular retail deal but molding it into a ‘buy here, pay here’, it’s gonna be really tricky and then if someone does it, there’s going to be a lot of failures at first until they get it right.

Zach: I’ve seen more sophisticated investors get into the ‘buy here, pay here’ space, what are your thoughts on the increased investments, let’s say over the past five years, in the subprime marketplace and what does that mean for a small ‘buy here, pay here’ operator?

Jason: So, I think the funds are definitely coming in, and that’s driving riskier sales, it’s obvious, that money in the street that we are talking about is able to grow longer because you’ve got the financial backing to be able to do that and all for those same customers lower down payments or remaining low down payments but putting them in higher-priced cars. 

For the average ‘buy here, pay here’ dealer, I’m not sure if it’s really going to affect them because there's a certain model customer that that’s going after. And it’s a little bit more of a sophisticated model and when we’re really talking about the traditional ‘buy here, pay here’, I still think it’s a relationship game with the customers. And I think, ultimately, that’s what keeps these ‘buy here, pay here’ dealers and other independent dealers in business.

Zach: So, what are some of your predictions for 2021 and what’s coming down the road for ‘buy here, pay here’ dealers?

Jason:  Well, I hope things somewhat return to normal at least if not in the 1^st quarter, in the 2^nd quarter of 2021. But I think that on the ‘buy here, pay here’ side, there’s gonna be a fallout from this. And typically when there are fallouts, the ‘buy here, pay here’ thrives. You wind up getting really good people who fall on some hard times and their credit score just isn’t what it used to be. And so they fall into that. Everybody falls down a little bit and so that ‘buy here, pay here’ space becomes expanded a little bit more and you wind up getting a little bit better customer out of it. 

Zach: So, what does Wayne Reaves have coming down the pipeline in 2021?

Jason: So, we actually have a brand-new release that’s gonna be coming out. We’re gonna slowly roll it out in January and then most of the customers out there will wind up seeing it in, probably May or June of 2021. And it’s just a complete, not to get too technical, you know the core source code that’s back there that does the calculation, it’s not an overhaul of all of that. It’s a good product but the interface we’ve taken time and we’ve streamlined some things just to make things easier to do, so that dealerships are basically able to step through the process a little bit easier particularly those complicated ones.

Zach: That’s great and was there anything I didn’t mention that you’d like to discuss?

Jason: Not necessarily. Certainly we’re known for ‘buy here, pay here’ because that’s the side that we came from originally, but we certainly evolved over to a full-feature company that services retail as well as buy here, pay here. And, Zach, I’m not sure if you’re aware of this with 2020 being such a crazy year, we haven’t seen each other as much as we normally do, but we became Google Partners in 2020. And so, we’ve rolled out a big advertising solution for dealerships and there’s gonna be a lot of exciting things coming on that side in 2021.

Zach:  That’s really cool and Jason, thanks so much for being on the podcast and giving us all this valuable information about ‘buy here, pay here’.

Jason: Yeah, thank you so much, and hope to see you again in person soon. 

Zach:  Definitely.