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Converting the Cash Buyer

The benefits go both ways

I actually remember when paying cash gave the customer leverage with the dealer. With so much of today's front end profit (40%) coming out of the finance department, Dealers prefer customers who will finance a fair percentage of the deal. The benefits to the dealer are clear:

Either a flat or reserve (when not special finance)
Easier to present aftermarket items as a payment vs. a price
Builds a stronger connection to the dealership

In order to realize these benefits, you must convert the cash buyer to some form of finance product. To do that, there must be a benefit to the customer. While there are a number of ways to perform 'cash conversions', let's consider just one: The customer who hates making payments.

The One Pay Lease

To the customer who doesn't like payments, the One Pay Lease is presented as a way to maximize return on investment while avoiding the regular payment cycle. It is usually structured as a 2 year lease so we'll use those numbers for discussion:

Simple Example:

Vehicle Cash Price: 25,000
One Pay Lease: 10,000
Available to invest: 15,000

Explain to the customer that the payment they make takes care of the depreciation for the first two years. The vehicle will depreciate that amount anyway, and if they pay cash, they will lock up the entire 25,000 in a depreciating asset. Be sure not to recommend any specific investment strategies unless, of course, you are also a CPA. One benefit of the lease is that they can invest the 15,000 for two years and decide if they want to keep the car at the end of the term. Even at 5% that could earn them in excess of $1,500.00. Another benefit is that taxes are often paid only on the amount that is spent. So if the customer chooses not to purchase the vehicle at the end of the term, they will have saved the amount of taxes they would have spent on the additional $15,000. The same is usually true for Balloons in states such as Texas where leasing hasn't been an attractive option.

There are a number of strategies for converting the cash customer. Most Sales Managers are well aware of these ideas and can walk you through the steps. Of course you need to practice your presentations to become successful.

Got a cash conversion idea? Share it with us by posting your comments here: