In automotive retail, and especially in special finance, “Cash is king” is an oft-repeated phrase. One of the biggest dealbreakers that exists in special finance is the lack of available cash for the required down payment. Whether it’s the minimum cash required by a finance company to make a deal, the cash necessary to overcome negative equity, or the need for cash to lower a payment to get within a payment-to-income (PTI) ratio restrictions, there comes a make-it-or-break-it moment in many deals — especially in the higher-risk SF credit tiers.

The need for cash is nothing new. At various times of the year, the availability of (or the motivation to part with) cash is much less than others for the SF customer. Christmastime, back-to-school and vacation months all stand as barriers to a customer who doesn’t have the luxury of using credit cards.

There is a great difference between dealerships that always seem to be able to help customers find a way to come up with the cash and those who cannot. It often comes down to something as basic as the car business itself: better sales techniques.

Opportunities Knock

Seldom do I write about sales techniques, but if you are looking for additional cash down, how and when the customer is engaged makes a significant difference. Since most SF customers start out as leads of some sort, there are three opportunities for a dealership team member to approach the subject of a down payment. In my opinion, two of them are the wrong opportunities — or at least less advantaged opportunities — but often they are the most frequently used.

Let’s start with the first opportunity: A customer connects with a sales consultant or BDC representative by phone to set an appointment. All too often, rather than just setting the appointment and getting the customer into the dealership, a credit interview ensues. Folks, this is the wrong time to start a credit interview, and it always begins and ends the same way: “How much money do you have to put down?”

Here you have to consider the psychology of the sale. The process for a SF customer to apply for an auto loan and potentially be turned down can be a humiliating event. And if they have been through the process before, they know they will be asked for a higher down payment than they initially offer. Before they have had the opportunity to drive and experience a vehicle they can see themselves owning, there is little motivation to offer any significant down payment. Just like prime customers, they want the most for the least.

Asking the down payment question on the phone builds barriers between the customer and their end goal — getting approved for an auto loan — and once those barriers are erected in the customer’s mind, they may begin to worry they will never get approved. That makes them much less likely to schedule or show up for an appointment.

Those of you who have read my writings for years are familiar with my “Green Balloon (prime credit)/Red Balloon (subprime credit)” sales process. The first step is to ask at least one early qualifying question to determine which direction the salesperson will take the customer. For subprime buyers, the second step is a credit interview that includes a credit application. Here is the second opportunity for the down payment question to come up, and to most it seems like the perfect time. In my opinion, it isn’t.

Asking customers how much they can afford to put down over the phone can cause them to worry you won’t be able to help them find financing. .

Asking customers how much they can afford to put down over the phone can cause them to worry you won’t be able to help them find financing. . 

Jumping the Gun

The salesperson must develop a rapport with the customer to be successful. Very few people will buy from someone with whom they don’t feel comfortable. Most sales pros and SF managers will work hard to find some common ground. Believe it or not, the credit interview is a great place to start.

Make it conversational. Talk to the customer about their job, their career, their family. Then, sooner or later, the question comes, “How much do you have to put down today?”
Is there a good answer? Of course: “Whatever you need!” Naturally, this response is seldom heard. You can expect a figure somewhere between zero and $500. The salesperson has asked, so they must acknowledge the customer’s answer and let them know they have been heard and understood.

It may not yet be apparent, but the conflict has begun. It shows immediately if the salesperson indicates that the number the customer has offered is insufficient. It shows later, after a vehicle has been selected and the deal is desked. The initial offer to the customer includes a down payment that is $2,000 to $4,000 more than they told the salesperson they had. At this point, the customer and the salesperson are at odds. “Is this person deaf or just stupid?” the customer wonders. “I told them I only had $500 to put down. Why are they wasting my time?”

I realize it is beneficial to have some idea of how much cash the customer has to work with. It certainly makes the vehicle-selection process easier. It is how and when the question first surfaces that is at issue. If it is imperative that the desk must make the query, I believe there is a better way to approach it. It is a technique we used decades ago. Even I had forgotten about it until a dealer client of mine reminded me at a recent 20 Group meeting.

Virtually all credit applications ask whether the customer has a checking or savings account. Many even ask where it is. Years ago, we would ask what their balance was. Today, more people are using online banking, so more car buyers have a good idea of where they stand. Generally, in the process of applying for a loan, customers who are looking for an approval will offer the best number they can remember. The salesperson simply acknowledges it and proceeds. They now have obtained a number that they can use to begin to plan a deal around without having to ask the specific question.

I Want This Car

Using this method, the third and best opportunity to approach the down payment is after the vehicle has been selected (assuming the salesperson helped them select a unit appropriate to their income and credit history). Now the salesperson or special finance manager presents their initial worksheet with the transaction details.

Yes, in most cases, the cash down will exceed what the customer hoped to put down. But in this case, there has been no breach of the confidence the salesperson worked so hard to develop with the customer. More importantly, the customer has now selected a vehicle they actually want to own.

Indeed, the required down payment may still exceed their immediately ability, requiring them to ask a family member for assistance or co-sign the loan. This may not be your customer’s proudest moment, but they will be motivated to overcome their reluctance and come up with the cash to make the deal. Even if they are in a position where the cash is available — just more than they wanted to put down — asking for it after the customer has expressed interest in a vehicle makes it much easier to increase their investment.

Certainly, there are other techniques to sell why additional down payment is a good idea. I have used and heard a number of effective closes. You may consider these rather obvious statements but, presented to a customer who wants to take home the vehicle they selected, they can often help loosen their grip on available cash:

  • Taxes and license: After negotiating the vehicle transaction, including the properly disclosed down payment, the next question becomes, “And how were you planning to handle the sales tax, title and license, which we must collect at the time of purchase?”
  • Lower monthly payment: This one is simple math: “As we discussed, you must leave here today with an affordable payment. We want you to rebuild your credit. If you are like most of our customers, an extra $50 to $100 each month can be a big deal to you and your family. Additional cash down will set you up for success with a more affordable monthly payment.”
  • More attractive financing: Experienced SF managers know that bigger down payments create more approvals and more credit-building opportunities. “If you can find a way to put this additional cash down, you can take advantage of this financing opportunity and drive this vehicle home today, and affordable payments will make it easier to improve your credit rating.”

There are likely many other ways to sell the additional down payment. The bottom line is that every customer deserves a reliable vehicle and terms that will give them the best opportunity to improve their standing and, hopefully, become a loyal prime credit customer. The better you are at selling the additional down payment, the more vehicles you will be able to deliver. Through the holidays, until the tax refunds hit, it is a skill that can turn your special finance team into dealmakers rather than dealbreakers.

Until next year, happy holidays!

Greg Goebel is the CEO of DealerStrong and the industry’s leading special finance trainer since 1989. He is an 18-year former dealer principal and a highly sought-after speaker, author and consultant. [email protected]

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Greg Goebel

Greg Goebel


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