Cash Conversions

In recent years, the automotive industry has been undergoing significant evolution. The availability of better financing rates with extended terms, wide use of sales incentives either from manufacturers or dealers and lower or no down payment requirements have all contributed to the sales of new and used vehicles.

However these same trends have urged the small percentage of customers into paying cash for their purchases. When a customer says they intend to pay cash, it is very important to understand the reason behind it.

• Finance Charges – specially with availability of extended terms
• No monthly obligation – higher monthly payments due to increasing car prices and lower down payments
• Confidentiality – nationwide concern with privacy and confidentiality
• Habit – always pays cash

In response to these reasons, there is a lot that can be done to convince the customer to use the dealership’s financing. There is no reason to fall into a defeatist attitude just because the customer said they would like to pay cash for their purchase.

The other important reason for a conversion is to create a chance to make the products and services affordable to the customers. i.e. financing the Extended Service Contract in the deal is more reasonable than paying cash for it upfront.

Here’s some of those qualifying questions:

• How do you intend to handle the balance?
• Is the cash coming from your checking or savings account?
• Do you pay cash for most of your major purchases?
• Did you pay cash for your last car?

CUSTOMER AWARENESS

Benefits of the dealership financing should be pointed out to the customer using a soft and non-confrontational approach without going into an explanation at this time. It gives them something to contemplate while the finance manager proceeds with their presentation.

Some of the benefits that dealership financing provides:

• It costs less ————they will wonder what it means!
• It will afford you to protect your asset and credit
• You will have more money available to you.
• You will be protecting your savings and obligations.
• A monthly obligation can be arranged to fit any budget.

OBJECTION HANDLING

The customer will definitely have questions after the menu presentation concluded. This will allow the finance manager to enter into a dialogue that paves the way to handling objections. Customer’s questions will point the way to a correct approach.

FINANCE COST OBJECTION

If the customer feels the cost of financing is too high, determine the average percentage of interest that can be earned and then using that figure outline the following:

F&I Manager:
“Yes, you could pay cash, but then, you’d be using up your savings, stocks, bonds etc., Keeping that savings account open for an emergency could well be worth the extra cost which, if you look at the figures, isn’t that much money in terms of dollars.

“Let me show you what I mean:

“Our rate is 8.5 percent, which costs $4.58 per hundred/per year. You can earn 7 percent on that account, which costs $3.74 per hundred/per year.(before taxes) The rate difference is 84 cents per hundred/per year. Multiply that by the $20,000 financed, and you’re looking at a difference of $168 a year.

8.5% (dealer rate) costs $4.58 per hundred/per year
7% (interested earned) costs $3.74 per hundred/per year

$20,000  x  0.84  =  $168 a year.

That’s not much difference after all, and you still have a $20,000 available to you. Doesn’t it make sense to keep that money for a time of emergency or for a better investment opportunity?”