Mar 07, 2007

Busting Common Financing Myths

When it comes to consumer financing and water treatment dealers, there are two major factions: dealers who can’t live without offering financing and dealers who cannot imagine why they should offer it. Quite often, the “can’t live without it” dealers are the ones whose businesses are generating profits and growth, while the “can’t imagine why they should offer it” dealers are content to maintain the status quo. In some cases, the latter group has preconceived notions about financing programs that keep them from seeing the value these programs can add. Busting these myths can help dealers close more sales, generate more profits and reach growth targets they may not reach without financing.


Myth #1: My Customers Don’t Need Financing

Dealers often state this objection to consumer financing. They think because they are selling in affluent areas, targeting wealthier customers or selling in “conservative” markets, customers will not want financing; however, prejudging customers is a mistake. It is impossible to tell by looking at a customer’s home or car whether he or she will need (or want) financing. People who appear affluent may be up to their eyeballs in debt. Perhaps they realize the time value of money and want to take advantage of a “no-interest” promotion while their money earns interest for them. Or maybe they just don’t want to fork over several thousand dollars and would prefer to make monthly payments.

The point is if you don’t ask, you won’t know. Many times customers will give another excuse (they say they don’t need it or have to think about it) because they’re reluctant to say they don’t know how they’ll pay for it. There is a reason that nearly all major electronics stores, furniture stores and home improvement stores offer financing. It is because customers of all types sign up for it every day. Offer a financing option to everyone and you may be pleasantly surprised by the results. This myth is busted.


Myth #2: No One Asks for It

This myth is an extension of the first one. The fact that customers are not asking for financing may be the reason dealers assume they do not need it. But is that really the case? People are not generally inclined to ask questions that will embarrass them. Rather than say, “I want this but I don’t have a way to pay for it,” they may just say, “I don’t need this.” The sale is lost, but the salesperson doesn’t know the true reason why.

Maybe a potential customer is looking for a water treatment system and checks the Yellow Pages. One ad says “Financing Available.” The ad on the opposite page does not. Which business is the customer more likely to call? Something that simple could be the key that brings in new customers.

The way to be successful with financing is to actively advertise and promote it (including strategic use of “no interest” promotions. Offer it to every customer and let the customer make the choice about what works best. Taking away the financial worry of customers at the beginning of the presentation lets them focus on the features and benefits of the product, not the price tag. Don’t make customers ask for financing. Make it easy for them and you will make the sale. This myth is busted.


Myth #3: The Interest Rate is Too High

This myth is a variation of the first two. Some dealers justify not offering financing because they think the interest rate is too high and they assume the customer would not want it. Again, this is prejudging the customer, which is an unfortunate mistake.

Most financing programs offer interest rates between 15 and 23% APR. This is not only the case for water treatment financing programs, but also for those programs at furniture, electronics and home improvement stores. If customers truly thought the interest rate was too high, none of those programs would exist. Usually it is the dealer who has an objection to the interest rate, not the customer. Just because you wouldn’t pay that rate doesn’t mean that others wouldn’t. Many customers need the convenience of making monthly payments. Some are waiting for a bonus or tax refund and are willing to pay those rates for a brief time. Having a finance program in place will let you close those sales now rather than waiting for the customer.

A big reason finance programs succeed is because of the “no-interest” promotions they offer. Customers with good credit, bad credit and every variation in between will sign up for financing, regardless of interest rates, if they can get these promotions. If you choose a program with no pre-payment penalty, then you can use a promotion to close the sale immediately. It then becomes the customer’s responsibility to decide to refinance the balance or pay the stated interest rate. Offering every customer a 90-day, same-as-cash promotion may be cheaper for you than taking a credit card, and it gives the customer 90 interest-free days to shop their bank for a lower APR, if necessary. It comes down to offering customers the choice and letting them decide what fits their needs. This myth is busted.


The Final Word

Consumer financing programs are offered every day in many different industries, and they are flourishing. This shows that customers need and want these programs. By letting go of preconceived notions regarding consumer finance programs, dealers may find they can close more sales, generate more profits and reach growth targets they would not have reached without financing.


About the author

Andrea Swiney is marketing manager for Aqua Finance, Inc. She can be reached at 800.234.3663, ext. 225, or by e-mail at [email protected].