Car-Mart Stays the Course in Low-Interest Environment

by Marty Cook  on Monday, Sep. 1, 2014 12:00 am  

CEO Hank Henderson says there are some deals America’s Car-Mart can’t match. | (Photo by Beth Hall)

“The timing was good for morale. We’ve been working as hard as ever, and it’s good to see the folks rewarded. You do the right thing and you will eventually get rewarded for it.”

That’s the backyard analogy Hen-derson mentioned at the shareholders’ meeting. Henderson said it would be easy to attract more business by stretching the payments out a few more years.

“It’s like when you’re a little kid and someone is playing in your backyard and doing something you’re not supposed to do,” Henderson said. “You say, ‘I can’t do that.’ It’s tempting and it looks fun.

“If we dramatically lowered our underwriting standards and went out sold an extra 500-1,000 cars, which we could do, it would look amazing — until the losses started running. In our business, with the short [loan] terms, it doesn’t take that long for the losses to show up.”

A year ago, Henderson said, he would have predicted that the easy-money climate would have begun to abate by now. He said that feedback from individual Car-Mart sale lots suggests that fewer sales are being lost to other financial offers.

Henderson believes many of those deals were scooped up by people who might not have bought a car otherwise, so the market is beginning to return to Car-Mart’s usual buyers.

If easy financing helps someone buy a car when otherwise it would be impossible, then it couldn’t have been a bad thing, Henderson said. It’s just something Car-Mart can’t compete with.

“I think a lot of that has settled down because, after a while, people started to think, you know signing up for a used car loan for 5-6 years is probably not the greatest idea,” Henderson said. “It’s a tough business, and we’ve been around a long time. If the competition is doing something that is close, maybe you respond with a match to compete. But when we see people signing up customers for six years on lower-end cars, there’s nothing we can do. We just figure out ways to get others.”

For instance, Car-Mart has set out to offer more selection of lower-priced cars, a price range not as affected by the third-party financing climate.

One of the most reassuring statistics Car-Mart had in its first quarter was predicted sales per stores, Henderson said. Car-Mart sold 11,482 vehicles in the first quarter, up from 10,643 in the same quarter a year ago, and each of the 134 individual stores came in very close on projections.

“When the dust all settled, we were within, in total, a half-sale per store per month,” Henderson said. “We were really, really close. That is a reflection of the improvement.”

Lots of Lots

 

 

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