The Art of Converting Cash Deals

Speak with every cash customer before they leave. Implement a process with expectations for the sales team to turn over an F&I or sales manager every time they learn the customer is paying cash before the customer leaves. Call it compliance and require a sales agreement to be printed and given to the customer so they have the total dollar amount to take to their bank. When the salesperson comes and asks for the sales agreement, you can print it and personally hand it to the customer, giving you the opportunity to speak with them. This will allow you to find out if it’s true cash, or if they are getting their money from an outside source, ultimately giving you an opportunity to convert them and take advantage of financing through the dealership. This is basic, but if there are customers leaving your showroom intending to come back with cash and you didn’t have an opportunity to convert, this is costing you money.

Have the mortgage talk. If your customer has a mortgage, pull up Bankrate.com and find the calculator that will show the customer how much money they will save in interest and how many years they will shave off their mortgage if they were to apply that cash to their mortgage rather than pay cash for the vehicle. The numbers can be surprising and the decision to apply their cash to their mortgage becomes a no-brainer.

Protect cash with GAP. Explain to your customer how, when paying cash for a vehicle (sales price, tax and tags) that if they are in an accident and experience a total loss, they will most likely not recoup the total amount of money they paid for the vehicle. Their insurance company will give them market value, which will most likely be less than what they paid in cash, including taxes and tags. Then go on to explain how a better way to protect their cash would be to finance through your dealership and purchase GAP insurance, so in the event they experience a total loss, GAP will kick in and pay the amount their insurance company didn’t cover. Protect your cash!

Help them avoid being “ghosted.” Advise your customers to finance at a shorter term to qualify for a lower rate to build their credit and prevent themselves from becoming a “ghost” in the credit world. Never borrowing money will eventually make them a higher risk from the lender’s perspective, resulting in a lower score, if not a zero. Then, if they are ever in an emergency and need to borrow money, they won’t be able to borrow the money they need.

Explain compound and simple interest. Advise your customers to put their cash in a safe asset (treasury bills, money market funds, mutual funds, real estate) in the marketplace so it earns compound interest. This will help them earn faster and more safely while financing through the dealership at simple interest and using someone else’s money to pay for a depreciating asset. Help them understand the difference between compound and simple interest!

Leave retirement money alone. If a customer wants to pull from their 401(k) or retirement, remind them that their money is earning compound interest and bust out your math skills to show them a side-by-side of how much money they will lose in earnings over a given number of years that they plan to let their retirement build. When comparing that amount to what they will pay in finance charges to finance through the dealership over a 4- or 5-year term, the math will speak for itself. Also, with the 401(k) loan, if they ever terminate their employment, they will need to repay the 401(k) loan by the same due date as their tax return. If the customer is adamant, advise them to consult with their financial advisor before pulling the money. Any financial planner will tell them to not touch their money!

Keep a safety net. With all the uncertainty in the world in which we live, advise your customers to keep their money available for emergencies, or even investment opportunities, and use someone else’s money to pay for a depreciating asset.