Retail Finance – Your Hidden Gold Mine!

With all the challenges that face your business on a daily basis such as cross border shopping, lower margins and higher operating costs, you need to utilize all the tools at your disposal.  One of the most important programs available to you is consumer retail finance.  Here are some valuable hints on how to increase your income through retail finance.

Most of your suppliers/manufacturers have gone to great lengths to design retail finance programs that will assist in closing sales and earn you more income. As many of you may know, I was part of the first national in-house retail finance loan and lease origination system - introduced through Newcourt Credit Group in 1996. We learned very quickly what worked and what didn't and many changes have been made over the last 15 years to provide you with on-line systems that make it easy for you to process customer loans.

So the systems are in place – all you have to do is use them! Here's how.

Sign Up:  If you are not already signed up with your manufacturer's retail finance program, do it now!  These online systems are easy to use and are an essential tool for closing sales.

Advertise:  Check to see if your manufacturer or lender has POP materials and display them predominantly throughout your store.  Make sure you include your Retail Finance program logo on all of your advertising and your website.

Sell Your Program:   Make sure you offer every customer your retail finance program during the selling process.  Most banks would prefer their customers use their line of credit for recreational purchases, so sell the fact that you can structure an instalment loan with comfortable monthly payments.  This will preserve your customer's line of credit for emergencies, such as home or car repairs.

Sell Monthly Payments:  Don't fall into the interest rate trap when selling your retail finance.  There will always be a lender out there that has a better rate, so sell monthly payments.  Your customers are concerned with what their disposable income can afford monthly, consequently find out what your customers monthly budget is and structure the loan accordingly. 

It softens sticker price shock and gives you a sound platform from which to negotiate the sale.

Maximize your Income:  Always start at the top and work your way down when entering the sale in your online retail finance system.  Your first monthly quote should include Life & Disability Insurance if available in your program, manufacturers extended warranty and the highest incentive fee available to you from your lender.  If the monthly payment is too high you can start stripping things out until your customer is happy.  If you start from the bottom, that is the lowest rate with no insurance or extended warranty, you have nowhere to go in the negotiation process.

Customer Retention:  When you finance your customer in-house you reduce the risk of them walking away to shop price, because monthly payments becomes the focus, not price.  For those dealers who suffer from cross border shopping, remember your customers cannot get financing in the US.  Lenders will not finance out of country shoppers so use this in your sales pitch and your advertising. Obviously this is not going to work with everyone, but it is another reason to make your customers think twice about crossing the border.

Sell Your Programs:  Most dealers will have access to retail finance programs that are sponsored by your manufacturers.  Make sure you understand the rate buy down and/or deferred payment programs that are available by product group and use them in your negotiating process.  These are exclusive to your customers and are effective tools in the selling process. 

Utilizing your retail finance programs effectively can add substantial dollars to your bottom line.  Circumstances may dictate that you have to sacrifice some margin to make the sale, but that can be made up through your retail finance incentive fees. 

Those of you who have been around for more than 15 years will remember that there was no such thing as a National in-house, online retail finance program and certainly not one that was sponsored by your manufacturers.  Mining the gold from your retail finance program can mean thousands more dollars of profit, not only from the incentive fees, but in closing more sales.

So get mining!  Need help? Contact me.    

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