Benefits for Used Car Dealerships
The advantages for a used car dealers to offer financing are clear and well know since almost 50% of all car sales are financed. To name a few of the reasons why offering financing to your customers is a good idea, please continue to read the following points:
- By offering financing to customers, businesses can boost their sales, and increase their average sales transaction size. Financing allows customers to make regular, affordable payments toward the cost of a big-ticket item, instead of paying the full price up front. Taken in consideration that according to the AutoTrader Price Index Report, the average new vehicle price in June 2023 was $66,288, 21.3% above the price in June 2022. As for used cars, the national average is currently $39,645, 4.1% higher than it was the prior year. Flexibility in customer payments will make a big difference. Cost is often the first consideration for customers shopping for a big purchase: they want to know if vehicle they want will fit within their budget.
- By leveraging auto finance, you can eliminate the sting of sticker shock for your customers and shift the conversation away from total costs. Instead, you can show customers how low monthly payments can allow them to buy exactly what they want. Financing allows you to re-frame the sales conversation, shifting the focus away from budget constraints to the value the purchase will bring.
- Financing increases a customer’s purchasing power. Not only does financing make it easier to close a potential sale, but it’s also a powerful tool for upselling. You can demonstrate to customers how a small increase in their monthly loan payments can allow them to afford upgrades or additional products. The option to add after market products, like warranties, winter tires, rust protection packages, etc. will increase the profitability of the transactions.
- Offering consumer financing can give you a competitive advantage, allowing smaller dealerships to compete with franchises and Automotive Groups. Your business can attract new customers by offering financing plans. If a prospective customer is shopping around for a big purchase, they may be more likely to choose your company over a competitor that doesn’t provide financing options. It can also help you earn repeat business, as customer credit programs often motivate customers to return for future purchases. A study shows that 93% of buyers that use consumer financing for the first time would use it again.
- Allowing finance as an option to manage better your customer budget, they can take advantage of a sale that can be perceived as a “Good Offer” without worrying about affordability in that regards. Fortunately, some new and used cars have dropped in price, and car buyers looking to save money can still find deals. It is expected that average car prices will reduce gradually, but inventory has remained an issue due to ongoing supply chain disruptions and inflation.
For a used car dealer, finance could make the difference between and a day cleaning cars or a day with a successful sale.
In our next part of this 3 part article, we will be reviewing the benefits of financing for customers.
Gonzalez, N. review by Risman, M (2023, November 3). Why to finance vehicles instead of selling for cash?. Ontario Underwriters Newsletters. https://on-u.org/newsletters/