It's All About The Payment

By Myril Shaw, Dealer Profit Services

Let’s think about this for a minute…when was the last time you saw or heard a car ad, whether on the web, on TV, in print or on the radio that said something special like, “Come on in get your new Nisan Altima for the low, low price of $24,739.00”? 

 That was a trick question. The answer is “Never”! 

 What you did hear or see was something along the lines of, “For a limited time, get your new Nissan Altima for a low payment of only $199.00 per month." 

 The car guys are not dumb…notwithstanding your opinion or your experience. They sell 1,500 or 2,500 cars for a reason (or several reasons). One of those reasons is that they know how to connect with what the buyers are concerned about. 

 One the biggest concerns is not, "How much does this cost?”, or even if that is the underlying concern the easiest way to diffuse that issue, and attract the buyer is to flip the concern on its side by answering the base concern, “Can I afford this?" 

 "Can I afford this?" 

 Most buyers (truth be told, 90% of all buyers) do not have liquid cash sitting around to enable them to see a $25,000 $50,000 or $100,000 unit and just write a check with no other action. One way or another, directly or indirectly, your buyers will be making payments once they buy your unit. Maybe they will be working to replenish equities that they sold. Perhaps they will need to refill their home equity line. Perhaps they are just making payments to someone who does not benefit you, except that you have sold a unit. 

 Make a big purchase and payments are going to happen somewhere. 

 Why don’t you ensure that you are the beneficiary of those payments by having them go to a lender you have a relationship with and from whom you receive reserve and through whom you can also sell protective products? 

 So…lead with payment 100% of the time. From the first contact on the web or in other advertising through unit hanger signs to a qualifying question in sales, "What payment are you looking for?”, payment is the pitch. 

 There are online tools available that allow you to couple a web-based, soft credit pull, “Get Pre-qualified” lead with the next logical step – “Shop By Payment”. These tools let the buyer suggest their payment preference and then match that to your inventory – and yes, they still work with customers who have unrealistic expectations. 

 There are some common misconceptions about posting or suggesting the payment. Most common among these is that if you show a payment, somewhere in close proximity you have to show the price and all the terms allowing you to arrive at that payment. False! 

 You do need to show the small print, “Based on qualifying credit.” Beyond that, you must follow a consistent set of rules for the terms you are using and be able to demonstrate that you follow those rules all the time. 

 For example, for units less than $25,000 the APR used is 7.9% and the term is 120 months; for units $25,000 - $50,000 the APR is 7.25% and the term is 144 months; for units $50,000 - $100,000 the APR is 6.9% and the term is 180 months; and, for units over $100,000 the APR is 6.24% and the term is 240 months. Obviously, this is just an example and these actual numbers will change as the market conditions change, but the principle is correct. You simply need to be able to pull out a term sheet that you can show to every customer and say, “This is how we came up with that payment." 

 The guideline for setting your APR is to take mid-prime customer, look at the average Buy Rate from your lenders and set the rate so that you can get at least 6% reserve. Do the same thing for setting the term. Based on this guideline, super-prime customers can do better, non-prime customers will not be surprised, and you still have some room to negotiate if needed. 

 Everyone in the store needs to know the rules – and if asked, honest answers must always be given. There is no reason to ever lead with, or discuss, anything except the payment derived from your rules. 

 By leading with payment early and often you accomplish two things. First, you send the clear message that you can handle the buyer’s financing needs. Second, you hook the buyer by letting them know that, "Yes”, they can afford it.  

The final benefit of the payment approach is that it sets the stage for selling the Optional Protective Products. These are always sold by payment first and now the expectation is set! 

 Payment, payment, payment! 

 Attract, retain and close buyers by focusing on payment. 

 Long live payment!

Dealer Profit Services, LLC can help. Whether you want someone to take over your F&I and just drive profit to your store, help you some of the time, need some quick advice or just provide F&I Training/Consulting, we are here to help you. Contact us anytime at info@dealerprofit.com or give us a call at (470) 326-0966.