Are you closing as many sales as you could be?  If you are not utilizing customer financing then you may be losing potential sales.  Over the past decade I have spoken to hundreds, if not thousands, of home improvement product dealers about how they can close more sales with home improvement customer financing.  If there is one factor I universally find among large, successful dealers it is that they use financing to help customers pay for their products.  Obviously that statement is self-serving since we are in the home improvement financing business but it’s true!  In my conversations with dealers over the years I can recall only one or two large dealers that did not use this tool to help grow their business.  Home improvement dealers that understand and utilize financing have a higher closing rate which leads to lower sales lead costs and a much more profitable business.  Financing and credit when used responsibly by both the dealer and customer can be a valuable way for customers to comfortably enjoy the benefits from the upgrade to their home without a large upfront cash outlay.    Home improvement dealers that understand and utilize financing have a higher closing rate which leads to lower sales lead costs and a much more profitable business.  The fact is that for many families on a fixed budget a $150 monthly payment is much easier to justify and fit into a budget rather than spending a large, lump sum that could be upward of $5,000.  Some dealers that have not utilized financing may view it as “taboo”, particularly as a result of the recession and the negative focus on abusive mortgage practices during that time but, when used responsibly by both the dealer and customer, financing can be an effective way to pay for home improvement work.

So how can dealers utilize financing to help your customers enjoy the benefits of your products?  Here are three suggested steps:

• Focus the cost of the product as a monthly payment – Customer sales presentations emphasize the benefits the product or service has to offer but rather than quoting a lump sum price for the cost of those services a reasonable monthly payment can be quoted in exchange for those benefits.  It is important to remember that customers buy on emotion (i.e. the benefits of your product) and justify the purchase based on logic (i.e. a reasonable monthly payment that fits their budget).  So try utilizing a monthly payment amount rather than quoting a large lump sum.  You can always quote a lump sum if the customer wants to pay cash!

• Use a monthly payment range – So now that you are ready to incorporate a monthly payment amount into your sales presentation what monthly payment amount should you quote? I urge dealers to use a range of 2.0% to 2.5% of the total cost of the product or service to derive the monthly payment range.  So take for example a $10,000 project, multiply that amount by 2.0% (0.02) and 2.5% (0.025) which then yields a monthly payment range that can be quoted to the customer of $200-$250.   The reason I urge dealers to utilize a 2.0%-2.5% monthly payment is that nearly all credit worthy customers will qualify for a loan that has a monthly payment that fits into that range.  Additionally it will allow the customer to pay off the loan in a reasonable amount of time, four to eight years depending on the interest rate associated with the loan.  There are payment plans available in the market with a lower monthly payment amount but those could take the customer over ten years to pay off the loan if they made only the minimum monthly payment!!  A ten year plus payoff period is not responsible in my view and actually does the customer a disservice.

• Close with promotional financing options – One of the great added benefits of a good customer financing program is the availability of promotional financing options such as Same-as-Cash or Reduced Interest Rate. These promotional programs can be used to help overcome customer objections such as the concern about finance charges or having payments that start right away.  Promotional financing options can also be used in advertising to help generate customer interest which can turn into sales leads for the dealer.

To summarize, home improvement dealers that utilize financing have higher closing rates which lead to lower sales lead costs and a much more profitable business.  Quoting a monthly payment rather than a lump sum amount helps customers enjoy the benefits of the product without a large upfront payment.  We recommend quoting a monthly payment of 2.0%-2.5% of the total cost of the job which most credit worthy customers will qualify for.  This payment range will also enable customers to pay off their loan within a reasonable time frame.  Additionally, promotional financing options such as Same-as-Cash can be used to help overcome any customer objections.  Financing and credit when used responsibly by both the dealer and customer can be a valuable way for customers to comfortably enjoy the benefits from the upgrade to their home without a large upfront cash outlay.

– Scott Heritage