Price Or Payment – Only One Makes "Cents" (Or "Dollars")

Myril Shaw – Dealer Profit Services

"So how much is it?"

This sounds like such a simple question and yet it is so fraught with peril that it is almost impossible to imagine.

Let's start with this basic premise.  There is never a reason to talk about price!

What is the last car commercial you saw talking about the "low, low price of $29,500"?  You did not!  You saw a commercial talking about a low payment of $199 per month.

There are many dimensions to the price/payment conversation.

1)    Price will always sound expensive;

2)    Payment will always promote financing;

3)    Contrary to popular belief, there is no legal requirement to show or promote price;

4)    Quoted payments need to be based on commonly available terms and conditions, and must be consistent for everyone – as long as that is true, you can just quote the payment with no other detail.

Keeping in mind that over 80% of the people coming in who say that they are paying cash are NOT paying with liquid cash – they are paying with a Home Equity line, or the sale of stocks and bonds, or they are trying to organize their own financing around you – the price is just an expensive target number.  It gives away the information that a customer needs to "do it themselves" or it scares them away and in either case, it does you no good.  Why would you ever show the price?  (This is not to suggest that you don't tell the price if asked, just first be asked.)

Even if a customer has been looking at alternative financing sources, when you lead with payment, they will always rethink what they have been doing.  Your payment will always sound attractive.  At the very least, it offers the customer a "one-stop-shop" experience.  At best, it may be better than what they have been looking at.  In any case, it opens the door to profitable financing conversations and will help you engage customers with your F&I options.

There is a misguided belief that you have to display the price.  That is simply false.  You have to accurately disclose price if/when asked.  There is a huge difference between those two positions.  To be clear, when someone finances, they will be told the price that they are financing.  This issue is that disclosing the price on a payment that the customer finds attractive is hugely different than selling a payment on a price that the customer may be uncomfortable with.  Which would you rather be doing?

To be sure, there are laws and guidelines about how you disclose the price.  You have to be clear and consistent on how you arrived at the price.  What term is the price based on?  You have to clearly state that the price is based on "qualifying credit".  "Qualifying Credit" has to have specific criteria that do not change if you are asked to disclose it.  It cannot be based on any criteria other than what is available on the printed credit application and the credit report.

When you advertise payment you let people know that you can handle the financing and you make every unit far more attractive.

Stop with prices, start with payments and watch your sales and your F&I Profit reach exciting new levels!

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.