How to Drive Financing Forward in the Middle of a Cash Paying Market
Advice from national, well-known financial advisors is trending these days, with recommendations for consumers to pay cash for everything – including big automotive purchases. It’s advice that’s not always welcome at your car dealership and can sometimes be a nuisance for today’s F&I manager.
That advice – on top of recent trends in the economy coupled with a rising federal funds rate – could lead more customers to enter your dealership ready to pay cash for a vehicle.
So, how do you ethically persuade those customers to finance? You can help your customers make the best decision by arming them with important information they may not have considered.
Let’s talk rapid depreciation.
A former wholesale producer once gave this advice to a colleague of mine back in the 1980s: “Don’t buy a depreciating asset with your own money. Use someone else’s money.” Despite changing times, his advice still holds true today. The average new car will depreciate 50% of its value within three years of a purchase. Depreciation is something your customer may not have thought about. Is your customer sure they’d want to pay cash for a $25,000 vehicle only to have it be worth $12,500 three years from now? That’s like going to your banker and investing $100K and then waking up three years later to find out you only have $50K! By encouraging customers to finance at a low rate, they’ll be able to keep their money in the bank and hopefully earn interest from those funds.
Ask CUSTOMERS to pay it forward and help someone else.
Apply some emotion to your customer’s decision. If your customer isn’t worried about depreciation, educate them about credit scores and approvals. Your well-off customer may not realize that if they finance with their high credit score, it will affect your dealership’s credit portfolio and allow the finance department to approve someone with a lower credit score.
A simple, “I can get them in through you,” may encourage your customer to pay-it-forward. After all, life happens and a family may have a lower credit score, but that doesn’t make them unworthy of a car purchase. You never know what someone else has been through to lower their credit score, whether it is a sick child or some other unexpected life event that turned their credit score into a downward spiral.
Pay it off in 90 Days.
Assure your customer that if he or she has a change of heart, they can still pay their loan off early (within 90 days if they choose) and not have to worry about monthly payments. Your customer benefits because they have options and more time to make an important decision. Your dealership also benefits because you still get the customer’s A+ credit rating in your portfolio. Also, you’ll know you did everything in your power to get the customer to finance, even if it’s just for those first 90 days.
Use this advice to steer toward a more positive future.
As the economy continues to improve from the 2008 crash, interest rates are bound to go up. By employing these simple tips to help your cash-carrying customer to agree to finance, you’ll be training your entire F&I department to steer in more financing deals.
These tips will benefit your customer and help them make a smart money choice. As a result, your dealership will also reap benefits through a stronger credit portfolio and the ability to approve a wider range of credit scores.
About the Author
Eric Mélon has more than 30 years of experience in the automotive industry. Eric serves as President of Sales at Innovative Aftermarket Systems (IAS). To take advantage of more advice from Mélon and his team, visit iasdirect.com. EMAIL: [email protected]
