By Ace Christian – For BHPH United & Compliance Unleashed 2025 Ceaser Palace April 22-nd-24th 2025- If this article interests you then you need to come to the event register below. https://www.bhphunited.com/register-now
If 2023 felt rough, 2024 has been downright brutal—especially for Buy Here Pay Here (BHPH) dealers carrying their own notes. Collections are down, charge-offs are up, and for many operators, profitability has evaporated altogether. The worst part? We haven’t even seen the audit numbers yet.
This article is a heads-up. Not a scare tactic. Not another vague “economic outlook” piece. This is straight from the accountants, advisors, and operators with boots on the ground in our industry—people who know what it actually looks like to manage paper, work defaults, and try to stay profitable in a high-cost, high-risk lending environment.
“The Worst Year in a Decade”: What the Numbers Are Saying
Steven Carstens, CPA at SGC, puts it bluntly:
“2024 is noticeably worse than 2023. I believe this may be the first year since ’99 that shows a loss amongst benchmark dealers. Primarily, charge-offs continue to grow as consumers struggle with inflation. Customers cannot afford $600+ payments, and dealers need to be focusing on providing affordable, reliable transport.”
This reality—paired with rising interest rates and stubbornly high reconditioning costs—has created a perfect storm. “Interest rates and reconditioning costs continue to remain high, squeezing the bottom line,” Carstens adds.
The only silver lining for many? Reinsurance.
“Reinsurance programs continue to be important, as many dealers lost money at their dealerships but at least made some money through their reinsurance programs,” Carstens notes.
Looking ahead, he warns that 2025 may not bring much relief. However, there’s cautious optimism that tightening at the new car level might benefit the used car market.
“If we are lucky, we may start to see some higher-quality customers be turned down at new car stores and moved to used car stores. New car store finance companies are also struggling and have been forced to tighten their underwriting and increase their discounts, making it harder for subprime customers to be financed at new car stores.”
CLA: A Glimmer of Hope and a Push for Smarter Underwriting
While 2024 may go down as the worst year for collections in over a decade, Danielle Magouirk, Principal at CLA, is seeing signs of improvement on the horizon:
“During the first quarter of 2025, clients are commenting that they are seeing a favorable shift in the quality of their customers, which is being noticed in the downtrend of charge-offs for the first couple of months of 2025 vs. 2024.”
She attributes this to the prolonged effects of inflation and tight credit markets, which may be driving more reliable customers back to the BHPH space. As cost of capital remains high, businesses are naturally seeking lower-risk, higher-quality deals.
But Magouirk also notes a broader shift:
“In connection with underwriting, we are noticing many shifting away from the ‘seat of your pants method’ to using more AI-driven underwriting software solutions. This should give the operator better data and information to make informed underwriting decisions to be able to assess the outcome more reliably.”
The takeaway? Smart underwriting isn’t just a best practice anymore—it’s a necessity.
Monitor Your Static Pools Like Your Business Depends On It (Because It Does)
Robert (Bob) Parness, also a Principal at CLA, drives home the point that data—not just gut instinct—must guide BHPH operations moving forward.
“During 2024, we have noticed an increase in static pool projected rates compared to recent periods. We strongly encourage and feel it is essential for operators to implement and monitor their static pools of their portfolio, which should project out the dollar losses through the run-off of the portfolio.”
If you’re not monitoring your static pools closely, 2025 might hit just as hard as 2024.
Also, there is a concern of the new vehicle tariffs could inflate the cost of used vehicle inventories and lower availability, of which the additional burden will not be fully passed onto the BHPH customer.
The customers have already been subjected to economic inflation that in many cases exceeds their wage inflation and therefore, they are being squeezed out of the gate.
Final Thoughts: What You Should Be Doing Now
Here’s what smart operators are doing right now, before the audits hit and before Q2 2025 gets underway:
- Tighten underwriting. Use data and AI tools. Don’t go by gut alone.
- Reprice your risk. With rising capital costs and shrinking margins, pricing models from even a year ago may be obsolete.
- Lean on reinsurance. If your primary operation is bleeding, reinsurance may be your life raft.
- Track your static pools. Build the muscle to forecast losses and adjust strategy accordingly.
- Watch for quality shifts. Some customers are getting pushed out of prime and into subprime. Be ready to catch them—responsibly.
There’s no question: 2024 hit hard. But if you’re reading this, you’re still in the game. Now’s the time to adapt, lean in, and outsmart the storm.
If you’d like to see more content like this make sure to follow Ace Christian on LinkedIn and join us at BHPH United and Compliance Unleashed this year. https://www.bhphunited.com/register-now
