As we enter 2025, Buy-Here-Pay-Here (BHPH) dealers face an evolving landscape marked by rising insurance costs, increased financial strain on consumers, and a greater need for cash flow stability. One of the most critical tools in managing risk and ensuring financial security is Collateral Protection Insurance (CPI).

What Is CPI and Why Does It Matter?

Collateral Protection Insurance is an insurance product that protects BHPH dealers when customers fail to maintain their required vehicle insurance. When a customer’s policy lapses or is insufficient, Collateral Protection Insurance ensures the dealer’s collateral (the vehicle) remains protected in case of damage or loss. The reason why Collateral Protection Insurance is so important to the BHPH dealer in 2025 is that dealers are not paying a premium to avoid risk down the road. Dealers are collaborating with their customers to protect the vehicle and the relationship without incurring significant costs on either side. Collateral Protection Insurance is and always has been a game-changer for dealers.

Why Collateral Protection Insurance is Essential in 2025

1. Rising Insurance Costs & Coverage Gaps

In our 2025 Annual Outlook, we provide the hard numbers (i.e. reality) of what BHPH customers experience when it comes to insurance and car loan expenses. Collateral Protection Insurance bridges this gap, ensuring that the vehicle remains protected, regardless of the customer’s ability to maintain traditional insurance.

2. Increasing Repossession Risks

The biggest cut on a BHPH balance sheet is chargeoffs. With the cost to own a vehicle increasing, the chargeoff likelihood for dealers rises as well. Repossessions are no longer limited to a marginal portion of the population. With negative equity on the rise post-COVID, buyers find themselves unfavorably positioned. This is particularly concerning for lenders in the event of total loss claims. Keep in mind, gap coverages only apply if there is a primary insurance claim to begin with.

3. Cash Flow Stability for Dealers

BHPH dealers thrive on consistent cash flow. In these unique economic times, we can’t expect dealers or customers to come up with more cash. How can dealers and customers move forward with sales and lending in this current environment? We outline the path in our 2025 Annual Outlook. (link to landing page)

Flexible Ways to Implement CPI: With or Without Reinsurance

In recent years, there has been a common misconception that Collateral Protection Insurance could only be implemented with a reinsurance company. That is not the case. Our 2025 Annual Outlook (link to landing page) provides the pros and cons of both options. Collateral Protection Insurance does not need to be cost-prohibitive to small dealers. It can be a solution for all sizes of BHPH dealerships. 

Conclusion: CPI is The Standard

In 2025, BHPH dealers, no matter their size, must think like investors, making strategic decisions that protect their assets, improve cash flow, and ensure long-term profitability. Collateral Protection Insurance is a fundamental tool in achieving these goals, whether implemented directly or through a reinsurance structure.

Without Collateral Protection Insurance, dealers-lenders risk catastrophic financial losses due to uninsured damage. By incorporating Collateral Protection Insurance into their business model, BHPH dealers can create a more stable and profitable operation, ensuring success in an unpredictable market.

National Lenders General Agency is here to help you implement the best Collateral Protection Insurance strategy for your dealership. Contact us today to learn more about how Collateral Protection Insurance can safeguard your business in 2025 and beyond.