‘I can’t wait to take the next cash deal!’ said no F&I manager EVER.
Most see them as a ‘dead’ deal where there is little or no chance to hold any decent gross.
But it’s not a lost cause at all. Sure, it’s a little more challenging but in this current market, there is still a way to make these deals a positive one for F&I.
Have Cash Deals Increased?
Industry expert Experian has reported a leveling off of new car cash deals but a rise for used car transactions. It’s no wonder as used cars are selling at a record high in the last two years…many of similar make/model are selling for as much as their new counterparts.
Add to that the increase in rates to numbers we haven’t seen since before the Great Recession of 2008, and it’s clear why buyers have such sticker shock.
Rates increasing have brought a reality check to customers who before now would be much more likely to finance a car but now the thought of a payment $100 more than it would have been in recent years is just too much.
How can F&I managers gain something out of this rise in all-cash deals? What are some strategies to change the mindset of going into a cash deal?
Cash Deals Usually Mean It’s Not really ‘Cash’
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.
Dealers nationwide suspect the latter is happening more now that home values have sharply risen in many markets since the start of the pandemic.
No matter what, it’s still being paid back to someone somewhere. This is a good opportunity to tactfully remind a buyer that cars are a depreciating asset and cash is always better sitting safely in the bank or investment account.
Ask the Right Questions to Uncover Your Best Strategy
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 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.
None of these questions are in any way intrusive but there may be some buyers who might get cold feet realizing it’s not as easy to go do all the post-sale steps themselves vs. having the dealer handle it.
Be Light, Be Positive
Make the tone of the cash conversation light and you may be surprised how easy the next part becomes.
Go through your menu presentation the same as you would with any other customer but consider offering a ‘deal’ for all cash buyers. Nothing wrong with taking a negative and making it a positive for their wallet by saying you have lower VSC pricing for buyers like them.