June 2010 - Feature
New Spin on Cash Conversions
By George Angus
They’re paying cash.” Boy, how we dread hearing that. The sales department just did its job and sold a vehicle. The deal is made, the customer is satisfied with his or her purchase, the dealership made a profit, and it’s time to send another unit down the road. Everybody’s happy — well, except for you, the F&I manager.
You get to do the paperwork, make sure all the details are taken care of, pretend you’re happy for all involved and make no money for your efforts. Sound familiar?
The past year has brought most F&I managers an unusually high percentage of cash buyers. At the National Auto Finance Association’s conference in June, a J.D. Power and Associates analyst said the number of customers paying cash increased to 30 percent of retail transactions last year.
There are several reasons for this trend, many having to do with the state of the economy. Simply put, buyers who are financially stable enough to pay cash for a vehicle have become wary of financing.
Making Cash Conversions Work
We have spent a lot of time studying the effectiveness of several cash conversion methods commonly taught to F&I managers. While some methods have shown some promise, none seem to work as advertised. When these techniques prove to be only marginally effective, busy F&I managers tend to stop using them and settle for presenting cash customers with a service contract, chemical, etc., and move on. The result is a much lower percentage of product sales penetration to these cash customers.
So, what does work? We have found that, to be consistent, a cash conversion has to be easy to do, non-confrontational and simple enough for the customer to understand quickly. It’s also important that you not confuse your customer by offering financial advice and giving them choices at the same time. We have developed a technique that, if used every time, achieves these goals and is effective in converting one out of four or five cash buyers.