The Ins and Outs of Customer Financing
A $2,000 estimate is a lot for a customer to process, says Kim Jacob, co-owner of Jake’s Automotive in Sterling Heights, Mich. For a family, that can be a lot to drop in one trip.
Financing offers an alternative means of payment, Jacob says, that can help take away some of the burden and allow customers to get all repairs needed on the vehicle done at once without having to pay the full amount upfront. Jake’s Automotive has offered financing to its customers for 20 out of the 26 years it has been in business. On average, at least one customer per week takes advantage of the financing options that are offered and Jacob thinks that it’s helped Jake's Automotive sell more jobs and attract customers that they might not have had they not offered the service. Jacob shares how she markets it to her customers.
There are different types of financing options available for shop owners to pick. Our financing is offered through a package with NAPA. It’s run through Synchrony Bank and GE Capital and is made available to NAPA stores. The package that we signed on for offers marketing tools that can be put around the shop, along with website and print advertising. For now, that’s all we do in terms of marketing for financing. This year, we’re looking to do some stuff on social media as it’s become more prevalent. We just hired someone to handle that, so that’ll be coming out this year.
In order to offer this, we have to pay a finance charge, just like a bank would charge. Beyond the charge, we get paid the full amount that day and do not have to keep track of the customer’s payments. Those go straight to the bank. Aside from the charge, there’s no risk to us. If a customer doesn’t make their payments, they are charged a certain percent of financing from day one and that is handled between the bank and the customer.
I offer the option to almost every customer that comes in. I try to offer it when I’m in the midst of a sale. For a customer that has a bill of $2,000 and can only afford $500, it’s a great option. Financing allows them to fix the car in one visit.
As far as customer interest in financing, it goes through different seasons. I’ve noticed that interest is much higher during the Christmas season than it is when people get their tax returns.
Once the customer decides they’re interested, we have an in-house application. I go through the process with them, which takes about five minutes total. We gather basic information from the applicant and once the application is complete, we input the information into our computer and it’s sent to the bank and it instantly shoots back whether they were denied or accepted and for what amount.
“It's a revolving credit line that makes it easier for the customer to keep making purchases.”
—Kim Jacob, Co-Owner, Jake's Automotive
Once they are approved, the customer can decide the amount to be financed. If the bill is $2,000 and she only needs $1,000 in financing, she can choose to do that as long as she’s approved for it.
Within a few days, the customer is mailed a credit card that is branded with our business name. All of the necessary information about the payments is sent along with it. The customer is then responsible for making the payments. It’s a revolving credit line that makes it easier for the customer to keep making purchases. The payments are not mailed to us. Synchrony Bank takes care of that.
There are different payment options. There’s a six-month same-as-cash option and a nine-month option. When offering it, I only bring up the six-month option. It’s better for us as a shop because the charge is lower than the nine-month option. It’s also better for the customer. The six month offers same-as-cash, which means no interest for the customer. It’s easy financing right away and once they make a couple of payments, customers can go ahead and get their regular oil changes. Sometimes to make the sale, you might have to offer the lengthier option but I always start with six-month.