Auto repairs can be expensive. In many cases, consumers are caught off-guard by the expense and don’t have discretionary money available to cover the costs, says Bill Haas, business performance coach for the Educational Seminars Institute (ESI).

And, many shop operators have found that they can boost their service offering, ease customers’ financial stress, and still land jobs by offering financing options.

“When consumers make major purchases, they will take advantage of opportunities to use someone else’s money instead of their own. That’s just smart economics for consumers,” Haas says.

There are two ways to go about implementing a customer financing program, depending on the amount of risk you want to assume. You could opt to create your own in-house program, or you could register with an outside entity to offer a line-of-credit option.

Ratchet+Wrench spoke with two shop operators who have gone different routes to help their customers finance repair costs.

In-House Financing

Wayne Little, owner of Wayne’s Auto Repair, a two-shop operation in Ohio, says it was common for customers to come in for an estimate and leave after deciding they couldn’t afford the repair. So he opted to implement a financing program in 2009 to help sell jobs in a way that wasn’t financially obtrusive for customers tight on cash.

The Plan: Little’s financing program is managed entirely in-house—no creditors or outside companies are involved with administration. The program, which is made available to every customer, is a 90-day financing plan. Here’s how it works:

- Requires a repair bill of at least $500

- 10 percent interest is charged to the final invoice

- 50 percent of the invoice is due at the time of service (cash or credit)

Customers submit three pre-dated checks dated 30 days apart. Customers pay roughly 20 percent of the bill monthly for three months.

For example, say a customer’s estimate is $500. Through the program, the customer agrees to pay $500 for the repair, plus 10 percent interest, for a total of $550. The customer pays 50 percent up front ($275), and finances the remaining $275. The customer then provides the shop with three checks dated 30 days apart for $91.66 each.

Qualifying for the Plan: Little says customers must prove they have the ability to repay the debt. Customers are required to submit a valid driver’s license, state or military ID, along with a copy of a recent pay stub. Little sends the information to an outside company that instantly verifies whether the individual has written any outstanding or bad checks. That process is free for customers.

Upon approval, customers sign a legal contract to ensure payment within the specified time period.

Business Improvement: Little says the financing program has lead to three key benefits for his shop:

1. Customer service. “It allows me to take care of my customers and meet their needs by offering a solution to financial concerns,” he says, noting customers can keep their personal credit cards open for other emergencies. “We get repeat business and we’re well-liked because we work with people.”

2. Closing ratio. “This does sell more jobs,” Little says, adding that 2 percent of his customer base takes advantage of the offering. “This is a great selling point to persuade people to stay.”

3. Revenue. Little says the shop has increased revenue because he’s selling jobs with 10 percent interest.
“We’re making more money in the end,” Little says. “Not only are we selling more jobs, but we’re receiving more money for it than we normally would.”

Little’s Implementation Advice: Little’s in-house financing strategy does mean he’s loaning out money for a period of time. To make it work, Little says shops need to have strong working capital to temporarily float those costs without negative business impact.

Little says he works with a $5,000–$10,000 cash flow deficit at any given time, which he took into account when designing the program.

“We require 50 percent of the repair cost up front, which covers all mechanic and parts overhead costs,” Little says, noting he only has to float the gross profit from the job.

Credit Financing Program

Nannette Griffin, owner of Griffin Muffler & Brake Center in Fort Madison, Iowa, wanted to find new ways to generate more loyal, repeat customers.

In September 2013, she registered her shop for a credit-based financing program called CarCareOne through GE Money. CarCareOne is a private label credit program which brands credit cards to the specific business offering the program. CarCareOne is specific to the automotive industry, and provides consumers a line of credit to purchase any automotive repair, part or product. Currently, roughly 2 million consumers nationwide have a CarCareOne line of credit.

The Plan: On purchases of $300 or more, Griffin’s customers can qualify for a six-month, no interest financing plan. Customers make a monthly payment until the balance is paid in full, with a monthly minimum of 5 percent. A 29.99 percent financing fee is added to the customer’s balance if the bill is not paid in full within six months.

Griffin says she pays a 1.99 percent fee of the total bill to process the credit card, which is comparable to the cost associated with processing any other type of credit card like Visa or American Express.

Qualifying for the Plan: Griffin says customers fill out a basic credit card application, and submit a photo ID and one major credit card to qualify for the program. Griffin inputs the information through an online portal, and is notified whether the customer qualifies based on their credit score within minutes.

Business Improvement: “Many customers say they can only afford about half of the repairs listed on the estimate and need to come back later when they have more money,” Griffin says. “The financing program allows us to capture the customer right now, not later.”

Within the first week of offering the program, Griffin says she landed six jobs worth $4,000 from customers who claimed to be financially tight.

In addition, Griffin says the financing program will generate a solid following of repeat customers down the road. The CarCareOne card is branded with her shop’s name and logo, so customers are tied to the shop if they want to use it again.

John Howard, automotive industry marketing manager for GE Money, says consumers who have an exclusive line of credit at a particular retailer tend to spend up to 30 percent more than customers who don’t have that retailer’s card.

Griffin’s Implementation Advice: Griffin says the branded credit cards mean a lot when it comes to customer loyalty. So the more people you can get to sign up, the better.

Griffin promotes the financing offer to every customer who comes through the door, even ones who plan on paying with cash. Griffin also has a promotion on her website that says, “Ask me about qualifying for six month, no interest financing.”

Update Your Sales Presentation

If you decide to implement a repair-financing program, Haas suggests making the offering part of every sales presentation—no matter what repairs you’re performing or what the customer’s needs are. That allows you to promote the service for customers with financial concerns, as well as customers who just don’t want to spend lots of money, without directly asking about their financial situation.

When making sales presentations, tell the customer what you found, what needs to be done, and what it’s going to cost. Before they can respond, tell them you have financing available and describe the program. That allows customers to have the information in the back of their minds as they make final purchasing decisions.

“You don’t want the financing availability to be a reaction to a customer’s financial concern. You want to put it out there right up front,” Haas says. “Remember, you’re not telling people how to pay; you’re just offering something that they might benefit from.”