Hollis Goode
Regional Vice President
EFG Companies
How comfortable is your sales team with asking for cash down payments on every transaction?
With the plethora of $0 down advertising, it’s become more commonplace for customers to expect to put $0 down on their vehicles. However, as any F&I manager will tell you, this makes it more difficult to secure a loan that is beneficial to both the dealership and the customer.
Take a look at the deals coming to the F&I office. If more than 20% of those deals are for $0 down, then there is a breakdown between your sales staff and the F&I desk.
Granted, the sales team might find it difficult to broach the subject. After getting a “no” once, they might give up, assuming they can’t negotiate. This mindset needs to be overcome in the same way you train your sales people to ask for the sale and negotiate the sale price. The more training and information you give your sales people, the less anxiety they have when asking for the sale, for a down payment, for a trade-in value, etc.
Remember, it is always better to ask than to assume the answer is no. After all, we all know what assuming makes out of you and me.
After looking at the number of deals coming to the F&I office, the next question to ask is whether your sales team knows the dealer and consumer benefits of cash down payments. Simply knowing these benefits can alleviate that anxiety in asking for the down payment, and enable your team to better negotiate with the customer.
On the dealership side of things, asking for more cash down gives your F&I managers more wiggle room to secure financing that will allow for the sale of F&I products. This is important for your sales team to keep in mind, as this could affect overall dealership profitability.
Think about it this way, if a customer wants to put $0 cash down on a $20,000 vehicle, then the F&I manager has to find a lender that will finance more than $20,000 to account for F&I products. If the customer is credit-challenged, this could be more difficult, if not impossible.
On the other hand, if a customer is willing to put $5,000 cash down on a $20,000 vehicle, then the F&I manager doesn’t have to increase the amount financed much more to account for the F&I products. In addition, if the customer is credit-challenged, that down payment could boost their tier rating, making it easier to secure financing that is beneficial to both the dealer and the customer.
On the customer side of things, providing cash down payments enables customers to:
- lower their monthly payments;
- reduce finance charges;
- build equity faster, which in turn provides more flexibility at trade in; and,
- shorten the term of their loan and pay off their vehicle sooner.
Given those four significant benefits, it should be much easier to negotiate with customers to get them off of $0 down. A good starting goal to set is to have 50% of deals coming to the F&I desk with at least $1500 cash down, and no more than 10% coming to the desk with $0 cash down.
Of course, creating an atmosphere where the sales team takes accountability for asking for cash down payments requires a team approach to F&I. The long-standing division between the sales floor and F&I desk needs to be taken down; and, F&I managers need to become accountable for sales training and working with the sales team to ensure the mutual success of both departments.
Training your sales team on the benefits of cash down payments can be as simple as a manager reviewing the benefits with your team. Your F&I managers know this information. That’s why they ask for the down payment again when the customer gets to their office. But, how often do they step out on the sales floor to have a constructive discussion with your sales team, rather than just complaining at the desk?
Empower both your sales and F&I teams to take accountability for their individual and combined success with EFG Companies. With almost 40 years of retail automotive experience, our experts in the field know the challenges you face with maintaining a high performance team. Put EFG in your corner with a proven track record of training and developing high performing teams through proven methodologies and ongoing support. Contact us today!