Converting the ‘Cash’ Buyer...Yes, It Can Be Done.
Cash deal. Just hearing that phrase almost always deflates even the most successful F&I manager with years in the business. Many an F&I manager would try to disappear if they thought one was coming.
Is there an effective dealer solution strategy to convert those buyers to dealership financing? Are there ways to still hold a profit on these deals? Yes...but it’s tricky.
Clarify if it’s really a cash deal.
Cash deals generally happen when a buyer has either secured financing on their own with an outside lender (bank, usually a credit union) or they really do have the cash for their car. Some may use a HELOC (home equity line of credit) essentially taking out the cost of the car from equity in their home.
If they are using a credit union draft or HELOC funds that were transferred, it is technically still a payback scenario. They either make a monthly payment for a loan term for a standard loan or they are paying back a smaller payment over time drawn from their home equity. Either way it’s still being paid back. This represents the vast majority of cash deals in the market today.
But it’s usually never just a pile of cash.
The interview is key.
It goes without saying that you need to know before the deal comes into your office if they are a cash buyer or finance. If they have their own money, immediately meet them on the sales floor if possible and ask a couple of quick questions as a ‘matter of procedure’. The customer should have no problem when it’s phrased this way.
Ask if they have a draft from a financial institution to be signed over. If they do, you can assume a credit union is involved and the second question that follows would be to ask if the dealership will be responsible for assigning the lien for the title. If they say yes (and they probably will), then you know before they walk in exactly how you need to approach them.
If they say they are writing a personal check, ask the same about the lien assignment. If they say no, they either really do have cash sitting around or they are using funds from a HELOC.
You have the answers. Now pivot.
Cash buyers either want to guarantee a lower rate without haggling or prevent the dealership from adding points on the rate. But unless they are truly paying cash, they still have to be shown their options for financing and doing some research is critical for the F&I manager to be effective here.
Be sure you know what local credit unions are offering for rates/terms. It doesn’t always work but being able to show them that your financing options may only be $10 or $20 difference but may allow for the addition of a valuable maintenance plan or VSC that they won’t have to pay upfront for all at once.
Make the point that they are still paying someone for the car ultimately. And it’s ok to gently remind a buyer that if they are using a HELOC to purchase their car to benefit from a tax break, that may not work as the tax laws have dramatically changed that write off for HELOC’s and second trusts.
Still an opportunity.
All is not lost...if they have THAT much cash, they can still afford products like warranties, tire & wheel, and maintenance plans. Don’t shy away from executing your strongest menu presentation just like you would any financing buyer. If you are consistent and confident, you could see a 10-15% bump in cash deal product penetration.
Look at the next cash deal as a challenge, not a worthless effort. Every buyer deserves your best effort and presentation and you deserve every opportunity to make a solid PVR regardless of how they choose to pay for the car.