Why implement an auto repair financing program? Bigger close rates, more revenue, and better customer service.
A customer walks into your shop with a problem: his brakes make a loud, grinding sound when coming to a stop. Your service team takes a look, and the problem keeps getting bigger: rusted calipers, old brake pads, and unstable alignment. Pretty soon the guy is sweating, until finally, he says, “Why don’t you just fix one for now, and then I’ll come back for the rest when I have the money.”
It’s a slim chance he shows up again, and that means less profit for you. But there is a solution for dealers and customers alike: auto repair financing.
With a program in place, whether set up in-house or through a third-party, your advisors have better control of the situation. They can offer more affordable options, close the deal on the spot, and add further revenue potential to each customer who walks through the door.
Three reasons you need auto repair financing options at your dealership
1. It creates an opening for your advisors to close a profitable deal.
Let’s be honest: repairs can be expensive. According to the 2016 CarMD Vehicle Health Index, the average cost for engine-light-related repairs was $387.37. Many people can’t dish out that kind of money unexpectedly. That puts your advisors in a tricky spot, especially when they’re trying to convince people to make recommended repairs.
But with auto repair financing, the numbers get smaller and easier to handle. What sounds better, $1300 due now or $75 due at the end of the month?
2. It offers your customers a service that takes pressure off.
Providing better services keeps your customers happy and your dealership thriving. Have you ever felt the pressure of having to spend money on repairs you needed? It causes a lot of stress, and most people try to figure out a way to get around it.
They’ll say, “fix this, not that” or “I’ll be back once I get paid.” Auto repair financing fills that need to solve the problem now.
3. It gives your dealership more ways to boost revenue and upsells.
Why let a paying customer flee the scene with little hope to return and continue repairs? That situation creates lost opportunities to delight, close, and retain customers. Offering an option to finance repair costs adds a measurable return on investment (interest paid) and prevents customers from bringing their car somewhere else.
The two best options for auto repair financing
Implementing a program requires one of two paths: create an in-house financing program or establish an agreement with an outside party. The first is riskier because you’re putting up the money, but that also allows wider opportunities for profit.
Option one: guidelines for an in-house auto repair financing program
- Write up a legal contract that binds the customer to repay the loan in a given period (and consult a legal or financial expert to protect yourself from liability).
- Create a list of prerequisites to qualify for financing. That includes submitting paperwork like paystubs, credit analysis, and valid I.D.
- Take at least some portion as a down payment at the time of service.
- Be clear (in writing and in-person) what days the payments are due, what fees apply, and how much interest adds to the loan over time.
- Consult a financing expert on how much capital and cash flow capability is needed.
Option two: guidelines for credit-based financing programs with third-parties
- Take time to research third-party organizations that offer credit financing options.
- Closely evaluate the qualification requirements. Do they align well with your average customer or are the expectations too high?
- Take into consideration the application fees, processing fees, and other expenses you will have to pay.
- Look for an organization that provides strong marketing materials, brochures, flyers, and administrative support to promote your auto repair financing options.
- Keep in mind that branded credit cards—offering an exclusive line of credit through your dealership—promotes customer loyalty.
The best way to boost your upsells with auto repair financing
It’s all about the pitch. If you’re going to implement a program, whether in-house or in partnership with another party, it’s important that you sell it all the time. Make auto repair financing a part of your sales process. When a customer comes in with an engine light issue, provide him with the costs and the option to finance through the dealership. If he can pay the full amount, great! If not, he can hear about more options.