Here’s how my mentor, Steve, would handle the most common cash-to-financing conversions. We would not attempt a cash conversion until we were assured that our customers were getting their cash from their checking or savings. If the cash was coming from a bank or credit union loan, it became a different conversion. Bank and credit union conversions will be discussed in a future issue.
Steve: Mr. Customer, you mentioned you are planning to pay cash. Is that cash from your checking or savings or will you be placing a lien?
Customer: I’ll be transferring cash from my savings into my checking account.
Steve: Congratulations on being one of the few customers who can pay cash. Do you always pay cash for your boats?
Customer: Yes, I always pay cash.
Steve: Why is that?
Customer: I just like the security I feel when I can pay cash.
Steve: You’re right, paying cash can give you a wonderful feeling. However, I’m seeing more and more cash customers like yourself choose another option. Would you mind if I shared with you why so many have changed their minds?
Customer: Sure, go ahead …
Steve: Do you plan to pay back the cash you are now removing from your savings?
Customer: Yes, I plan to save my money and over a period to replace it.
Steve: Let’s look at it this way. When you leave here today and pay cash, we have your cash and you have the boat. Instead of paying cash, you could put yourself into a “forced-savings plan.” We could arrange an agreeable monthly payment while you keep your money and earn interest. This way you won’t deplete your savings and can leave knowing your savings goal is achieved. You will also have the security of having cash for an emergency.
What’s more, we can protect your monthly payment. This means we will arrange for your payment to be made if you are under a doctor’s care for 14 days or more. The best part about it is that you never have to pay it back. Also, if you should pass on, your loan will be paid off free and clear. That means your heirs will get the boat as well as all the cash you tried to give us.
Wouldn’t you agree that keeping your cash could come in handy? Also, wouldn’t you agree having someone make your payment is really a much more secure way of doing business?
Customer: Well, you have a point. But I don’t want the hassle of making monthly payments.
Steve: You mentioned that you were going to replenish your savings after you buy this boat. The smart way of replenishing would be on a monthly basis. So, by providing you with an agreeable payment, we’re assisting you in maintaining your savings while giving you greater flexibility and protection.
Customer: That sounds good, but I’ve always paid with cash.
Steve: It certainly must feel great to be in your position. Nevertheless, in addition to the benefits I’ve discussed so far, there is something else you should consider. When you use our dealership plan, you are maintaining your credit standing.
Customer: But I already have good credit.
Steve: Good credit is important. I’ve always said, the two most important things for financial well-being are good health and good credit. Sometimes our cash buyers fail to maintain an up-to-date credit standing by not actively using the credit that is available to them.
Financial security does not necessarily come from taking cash out of your investments. Real financial security comes from knowing that if you had a catastrophic emergency, you would have the cash and you would have current borrowing power. It can be difficult at times to borrow money if you have not maintained an active credit standing.
I really think you will feel greater security by keeping your cash while, at the same time, renewing your credit standing.
Customer: You know, that sounds pretty good. I just need one thing clarified.I’m not earning that much money on my savings. Your interest charge for the loan is probably going to be much more. Isn’t borrowing money going to cost me more than paying cash?
Steve: Yes, it could cost a little more. However, keep in mind that your savings is compounding. In other words, you are earning interest on not only your principal, but your past earned interest as well.
There are many investment alternatives for today’s smart investor. If you were to find the right investment with the right return, paying cash may never have been a consideration. Think about it. Why would you use up your cash to buy a boat if you can earn a good return on your investment somewhere else?
I suggest you keep your cash and you investigate investment alternatives closer. Let’s see what your monthly payment would be.
Customer: Okay, go ahead.
EDITOR’S NOTE: Gart Sutton wrote the book on selling finance and insurance products — literally. His “The Professionals Guide To Finance & Insurance” has been a learning tool for dealers in the boating, automotive and powersports markets for years. His column will use excerpts from that book to help readers understand the opportunities they have with F&I.
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