Sometimes we refer to someone as having a “ton of cash,” or we talk about a “five-pounder.” What does that literally mean? Each new bill weighs one gram which means a pound of fresh new bills is worth $454 and a ton is $908,000. Oils and dirt attach to the bills as we touch them, which adds extra weight. That means an actual ton of $1 bills is a million dollars, and a pound is $500, which incidentally makes a “five-pounder” really only $2,500.
Half of all Americans don’t carry cash. Of the ones who do, 75% have an average of $50, while most have less than $20. Despite the lack of true cash, we should still ask for money down on every deal. In addition to being on the lookout for when we need the IRS 8300, there are other pitfalls to avoid.
The average American has $3,500 in savings, so it’s likely that your customer can write a personal check. The challenge with accepting a personal check is verifying funds. It’s frustrating to chase a bounced check a month later, which is why many dealers have opted to use a check guaranteeing system. There’s an added cost for it, so other dealers have opted to forego accepting personal checks and require cashier’s checks.
Accepting a cashier’s check typically means immediate funds, but there’s still a risk of fraud. There’s also the risk of poor CSI from unhappy customers who take it as a personal insult that we won’t accept their checks. Another risk is that letting a customer leave to go to the bank to get a check runs the chance of losing the deal.
Wiring funds is another option, and it carries other risks. Some customers’ banks operate quickly and can send funds instantaneously, and others do it in batches a couple of times a day. On the dealership side, someone has to walk into the scary controller’s office to ask whether the wire was received. Once it’s received, we have to be sure the person who wired the money matches the customer’s name so that we don’t accidentally miss an OFAC. Another major risk is with international wires. Most dealerships avoid accepting international wires because there’s a different set of regulations that don’t follow U.S. guidelines.
Credit cards are the option of choice for most customers, whether for the convenience of carrying a piece of plastic versus carrying a checkbook or cash, or whether it’s for the points that many people try to accumulate. The challenges for dealerships include dealer agreement restrictions, vendor agreement prohibitions, and general exposure.
The dealer agreements usually prevent us from accepting what’s essentially a loan on a loan, but many allow it if the finance source is notified prior to funding. The vendor agreement challenge is that many of the credit card companies will not allow us to restrict the amount we accept. Some dealers want to limit the exposure by setting a limit, but many vendor agreements obligate the dealership to accept whatever credit limit the user has. Whatever amount the dealership accepts, we run the risk of a credit dispute, which often means we’re charged back and then have to fight for it.
Most of us were trained that “cash Is king” because the more money a customer puts down, the more the dealer typically makes. Keep screaming “show me the money,” because we know that down payments often relate directly to gross. Ask for more, but always be aware of the risks associated with all forms of payment.