The Hows & Whys of Consumer Financing
If you don’t have a consumer finance program in place, you’re losing sales. It’s that simple. But
just having a program is not enough.
Understanding the Hows and Whys
of financing is critical to your
How to Choose a Company (or Two)
1. Check with the Water Quality Association or your regional associations to see if any finance companies are members. This shows a commitment to your industry.
2. Ask for recommendations from your fellow dealers. Their first-hand experience will be more valuable than anything a finance company says.
3. Check out company websites. Do their programs sound appealing? Do they specialize in your industry?
4. Talk with sales representatives. Are there fees for you to sign up? How long will the process take? What kind of support will you get? What types of credit will they approve?
If you choose a finance company that doesn’t fit your needs, you will not be able to successfully implement the program. You have to decide what is important—do you want to be able to talk with a live person when you call? Do you want a company that will look at both prime credit and sub-prime credit? What types of programs do you need?
Ideally, you should sign up with at least two companies. Each company has its own lending guidelines, so you may be able to get a customer approved with one lender even if he or she has been declined by the other. One of your lenders should accept
sub-prime credit. This will help you close more sales. But more lenders doesn’t necessarily equal more success. Carefully choosing two or three programs will allow you to develop a relationship with each company. These relationships can often lead to added perks (such as better approvals) for you.
How to Formulate a Strategy
1. Evaluate your pricing. Promotional (i.e., interest-free) offers from finance companies can cost you anywhere from 1 to 20% of the amount financed, depending on the length of the interest-free period given to the customer. Pick two or three plans that you think will work best for you.
2. Build at least some of the
promotion cost into your product pricing. If you choose three plans—one with a 1% cost, one with a 5% cost and one with an 8% cost—you may want to adjust your overall product pricing by 5%. This price increase won’t be noticed by your customers, and it will help you cover some of
the finance company costs.
3. Begin quoting payments to customers, not just total system costs. It is much easier for a customer to agree to an $80 monthly payment than a $4,000 lump sum.
Financing is a service you are offering your customers. And like any other service, it has a cost that you must cover; however, the benefits of being able to offer a no-interest payment plan are tremendous. These types of programs have the potential to help you attract new customers and to close more sales. And by selling on payments, you can make it even easier for your customers to say yes. People may not want to shell out several thousand dollars in cash or place a large amount on their credit card. Breaking the sale down to an affordable monthly payment can tip the scales in your favor.
How to Maximize Your Potential
1. Actively advertise and promote financing. Add “Financing Available” to your ad in the Yellow Pages. Have your receptionist greet customers with a financing offer: “Thank you for calling XYZ Water, featuring six months same-as-cash on new equipment sales.” Tailor all sales presentations to focus on low monthly payments.
2. Don’t prejudge your customers. You can’t tell by looking at a customer whether he or she will want to finance. Offer every customer two positive choices: “The cash price is $3,500 or we can do low monthly payments of $70. Which works best for you?”
3. Know the program. Work together with your finance
company to understand how
its program can fit your
If you don’t offer financing to every customer, you may be missing sales opportunities. There are a lot of customers who would never think to ask about financing. They don’t want to admit they can’t pay for your system, so they give you a different objection. Tell customers at the start of the sale that you have financing available and quote low monthly payments. This lets them focus on your product and not the price tag. Make it easy for them to say yes.
A Step Ahead
Knowing the Hows and Whys of financing will put you a step ahead of your competition. By carefully choosing your finance companies, formulating a pricing and sales strategy, and promoting financing to every customer, you can maximize your sales potential.