On Debt Collection
Operating a related finance company makes car dealers some of the biggest lenders, but too many of them try to DIY what should be professional.
Dear Friends,
Our family business is a buy-here, pay-here used car dealership in Phoenix. We sell people cars and we also finance loans for the cars we sell.
Sometimes people don’t pay as agreed and loans go into default. Cars get repossessed, remarketed, and sometimes there is more owed than remarketing produced.
That leads to deficiency balances.
Some people don’t pay them.
That leads to debt collection.
Large finance companies have in-house collections departments, but most small dealers don’t have enough contracts default to have a specialist in collecting bad debt.
They ignore their bad debt, preferring to focus on selling another car.
Others dabble in debt collection, figuring out as they go along how to use the courts to exercise their legal rights.
If they do it wrong, they can lose the right to collect at all on the bad debt.
Back in 2016, I took a debt collection law CLE course to make sure I knew the basics of collection law in Arizona. I met a great lawyer named Mikki Yitzchaki there who specialized in debt collection for BHPH dealerships.
After a while dabbling, I realized that a smart dealer finds a good debt collection lawyer like Mikki, instead of dealing with the legal hassles of DIY. When Mikki retired, Kyle Hallstrom took over the practice and brought in some new innovations.
A good debt collection firm will handle bad debt collections efficiently, professionally, and ethically for a reasonable fee. Once they have enough files, all fees are paid through recoveries and it becomes a steady stream of revenue to offset losses from defaults.
But this isn’t really about bad debt.
This is about letting other people help you do things so that you can focus on the things that you are passionate about.
Don’t spend your time doing things that you aren’t the best at or don’t love to do if you can delegate those things to someone who is the best or does love to do it.
Use a CPA to do your taxes. Use a service to choose your wardrobe. Let a therapist work out the kink in your neck instead of trying to do it yourself.
No matter what human problem you have, someone out there loves solving it.
Let them.
Yours truly,
Nick
P.S. If you are interested in this subject professionally, there is a somewhat more business oriented post about bad debt on my LinkedIn profile.