Why Should You Promote Financing?
Why shouldn’t you?
Today over 85% of new and used cars are financed in the U.S. and over 65% of all commercial equipment sales are financed. The most successful vendors and salespeople, whether for commercial or consumer products, view financing as an essential part of their sales and marketing plan.
#1: Control the Sales Process
The most effective way for a salesperson to eliminate time consuming price shopping and competitor proposal comparisons is to have a smooth and efficient sales process. In the United States, 65% of commercial equipment is financed. Leaving integral financing to outside parties lengthens the selling process, relinquishes a representative’s control of the sale, and provides heavy advantages to competitors who offer financing. If a bank decides to reject a customer, the customer will most likely look to the equipment company that offered them financing in their proposal.
Providing financing is simultaneously providing money to complete your sale. The first step to controlling your sale, is controlling the finance.
#2: Mention Financing Early
Financing should be an early, focal discussion in your equipment sales deals. Equipment sales reps often wait too long to mention financing, leaving financing as the final question in a deal. Many reps waste their time following rotten leads, just to find their buyer never had the means to purchase their product in the first place. As a result, the best way to effectively close deals is to begin the sales process in conjunction with the finance process. By doing so, you will eliminate dead leads and have insight to the quality of your customers from the get-go… you’ll know who to schmooze and who to lose.
Waiting until the end of a sales cycle also overlooks the opportunity to present rate deduction as a negotiation tool. It is much cheaper to guarantee a 3.9% interest rate than to deduct a 10% discount. When negotiating with hard pressed price whittling customers, deduct the rate rather than the total cost. See bullet 8 for more info on rate deduction.
#3: Utilize Your Finance Reps
It is our job to support your sales. Global Finance Group’s greatest asset to your company is our sales support, alleviating your financing concerns with our decades of experience and customer care. Since financing is an integral part of your sales process, our finance reps should be utilized as an extension of your sales team.
Your Global Finance Group rep:
- Provides a second point of contact to push your sale forward and keeps the customer focused on your offer.
- Acts as a source of information to educate customers and alleviate finance concerns.
- Is motivated to complete your sale, and is heavily invested in the success of the deal.
- Contributes to your prime customer service and customer care: writes thank you letters, sends holiday gifts, markets company specials.
Take advantage of your finance rep to help better your service, image, and company branding.
#4: Actively Promote Financing or Every Customer
I guarantee the top dealers and sellers in your industry provide some financing program, and market this program to all of their customers. A common mistake of sales reps is assuming particular customers will or will not finance their purchases. Without up-front convenient payment options, customers may hesitate to purchase a product because they believe it unaffordable. Showing a low monthly payment changes the customer’s perception on the pricing and their ability to purchase your product.
Make the most of your financing options by:
- Including estimated pricing on every quote… “It’s either $425,000 or $4,000 a month” on every ad, sales sheet, and quote, be sure to mention that “financing is available to qualified credit”
- Ensure two special promotions to feature, for four months at a time, during certain times of the year. Examples include: “3.9 APR for 60 Months!” “12 Months @ 0% Interest!” “Only $395 a month!”
#5: Sell the Monthly Payment, not the Total Price
Whether or not financing is a priority for your specific customer, monthly payments project more affordable purchases to all customers. If you are selling equipment for over $100k, customers will likely present price objections and price-shock during a sale. These “price-shocks” are often tactics to whittle down prices/sale margins. Quoting payments allows you to maintain a higher price margin by emphasizing the flexibility of a low monthly payment. If more than 50% of your customers are financing, why wouldn’t you reiterate that it’s only 1,900 a month?
#6: Know Your Finance Options
It is important sales reps are knowledgeable in all aspects of their sales, including financing options. Know the finance promotions offered, understand that your competitors are offering finance, and know how to ball park monthly payments under pressure. Knowing the ins and outs of financing will exponentially improve your chances of completing a profitable sale. When you initiate a sales cycle, don’t be afraid to ball park monthly payments verbally. Using this skill will effectively help you gauge the customer’s reaction to pricing and help you service the customer better, regardless of their financing needs.
#7: Get a Credit App Completed ASAP
Credit information provides a salesperson priceless insight and leverage. Sales reps waste countless hours annually chasing dead end customers. Getting in applications early provides the opportunity to qualify the lead and initiate premium customer care.
Sending the applications to us early is a great method to increase customer commitment to your company. Global Finance Group closes 80% of the applicants that we receive. Getting the application is one notch under a deposit check on the commitment scale. We always suggest filling the application out in person with the customer at the end of the first meeting. By just completing this, you’ve given yourself an 80% chance of closing the sale.
#8: Deduct the Interest, Not the Price
There are hardly ever any sales interactions where the customer doesn’t ask for a discount or negotiate for a deal. Equipment quotes with 10%, 15%, or even 20% price deductions are indicators of sales reps bending over backwards for minimal profit. By understanding finance, you can give the customer a deal and save your margin. By simply “buying down the rate,” you can offer a customer a deal costing you 4.5% in margin rather than 10%. Try offering a 3.9% interest rate before discounting off 10% of your purchase price. The customer wins with a deal and you save 5% in sale margin. Offering below market interest rates on tough sales saves your margin, creates an offer your customer won’t find anywhere else, and prevents routine discounting from undermining the value of your product.
#9: Compare Monthly Costs to Monthly Gains
What’s the major difference between selling a high-end Gucci purse and commercial equipment? Selling commercial equipment is much less emotional, so branding and flare are not of prime importance. Equipment sales reps who justify the price of their equipment on mere features and brand do not remain sales reps for very long. How does financing help reps minimize price-shock? Financing makes the product more affordable, and more importantly, appear more affordable. During the sale, the best sales reps go the extra mile and walk the customer through the investment. Compare the monthly cost of the machine to the monthly gains of the purchase. If the customer can confidently earn $10,000 a month and the machine costs them $2,500 a month, you’ve provided no sane reason not to purchase.
#10: Pricing in Finance
Very few companies can survive as the “low-cost leader”. Rather, many companies price their products to reflect the VALUE they offer their customers, through proprietary technology, exceptional service, and other company resources and services. Financing is an additional service that you offer your customers. When pricing products, consider incorporating financing costs into your pricing. For example, if you determine your average financing sale costs 5%, you can increase your overall purchase prices by 5%, and offer a discount for cash paying customers. This is how car dealerships are able to offer 3.9% or even 0% interest rates and still keep their margin. By doing this, you increase your appeared value and give your sales team room to offer more discounts and finance deals.
We hope you find this information helpful. Remember to contact Global Finance Group for all of your equipment finance needs.
Seth Morris, Head of Business Development Global Finance Group, Inc.