Keeping it simple with cash conversions is the best approach. That is, if customer satisfaction is important to you.

The traditional way of converting cash buyers is not only offensive to most buyers, but is largely ineffective.

I've heard finance consultants say to customers, “Why would you want to pay cash for your automobile?” Then they show them, due to compounding of interest, they somehow come out ahead by paying 7% and leaving their money in an account drawing 4%.

This been outlawed by the Federal Trade Commission because it is statistically inaccurate and misleading. It also doesn't work well as a sales approach. We talk the elderly couple into financing, and the bit of income we make is charged back when they get their payment book and decide to pay it off anyway.

Only 7.8% of customers paid cash to buy their new vehicle in 2001. Some of you may say, “Not in my dealership.” But the number of cash buyers in a dealership is affected by customer demographics. Certain vehicle models and geographical areas are more prone to cash purchases.

I can convert 0% of actual cash buyers and still have a highly profitable F&I office. This does not mean I am going to lie down whenever someone intends to pay cash. Just don't put a few dollars before our ethics.

There are some effective ways to convert some of our customers from cash to finance. But make sure that the arrangement we make for the customer is something that benefits them, not manipulates them into making us money.

The best thing that you can do to retain financing is to make sure they are actually using cash to pay for the vehicle. Some people will tell the salesperson or even the finance consultant that they're paying cash when they're actually taking out a loan:

Finance consultant: “Mr. Doyle, now that you've purchased your new vehicle, is getting the best possible financing important to you?”

Customer: “No, I'll be paying cash for the vehicle.”

Finance consultant: “Will you be writing a personal check or another form of personal funds? The reason I ask is, if you are obtaining a loan I need to have a lien recorded on the title.”

This will expose any intent to obtain financing somewhere else and give you an opportunity to convert them if that is the case. Once you have established they are indeed paying cash, the conversation begins like this.

Finance consultant: “Do you usually pay cash for all your major purchases?”

Customer: “Yes.”

Finance consultant: “Is it because you don't want to pay interest or you don't like to make payments?” (The customer will usually give you one of these reasons.)

If the customer says, “I don't like to make payments,” the finance consultant says:

“What if we could set it up so you didn't have to make the payments out every month, and you could save your cash for something else. Would that interest you?” (An automatic withdrawal can be set up with their bank.)

If the customer says, “I don't like to pay interest,” the finance consultant says:

“Mr. Doyle, reducing interest is your goal? Do you have a mortgage on your home? Do you have any credit cards?

“By paying down your mortgage, you will save a significant amount of interest.” (Look at the amount they are paying in cash over 15 or 30 years. They will save a significant amount of interest.)

The credit card interest rate is usually much higher than the rate you are offering them.

Other effective cash conversion ideas:

  • Use a one-pay lease to show them how they will only pay for half of the automobile.

  • Leasing their vehicle gives them a guaranteed residual value and protects them from market fluctuation.

  • If the automobile is financed and protected with credit life insurance, in the event they would pass away the loan would be satisfied and the customer's estate would still have their cash.

Whichever technique you use the important point is that you are giving the customer benefit. For some people paying cash is their best option, and trying to talk them out of it will only lessen our chances to sell them other products. Keep it simple!

Ron Martin is the author of the book, “The Vision of Finance and Insurance” and a national sales trainer and consultant for automotive dealers. To learn more about his company, The Vision of F&I, Inc., his book or audio training program, visit or call 1-800-413-9902.