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Why Your Shop Needs Consumer Financing and How To Do It

Today, every automotive repair shop should have consumer financing options. Most Americans cannot afford expensive car repairs. Having alternative ways of paying will not only help your customers afford those repairs, but it will also drive more business and increase your shop’s profitability. It’s a win-win for both parties! 

Your Customers and Your Auto Shop Benefit

Let's take a look at some important economic statistics in America.

  • 40% of Americans cannot afford an unexpected $400 car repair
  • 78% of adults live paycheck to paycheck
  • 35% of Americans have subprime credit
  • 1 in 5 adults have no credit score because they haven’t established credit
  • Over 20% of adults cannot afford to pay all their current month’s expenses

If you make expensive repairs affordable, customers are more likely to say “yes” to your recommendations. To prove that point, the average repair order when auto shop provide consumer financing is $1700-2000. Well above the national average of $300! 

Additionally, these customers typically do not ask for discounts, because you’ve already provided an easier means of paying for it. Therefore, these jobs are more profitable. The shops doing it right are adding $500,000 annually or more to the bottom line! 

Offering Consumer Financing

When it comes to offering consumer financing, it’s important to know who to partner with. Presenting bad options to your customers could eventually give you and your business a bad reputation. Knowing the different types of institutions and what they offer will help you make the right choice for your business.

Types of Financing 

Believe it or not, there are 4 types of consumer financing in the automotive industry–prime lending, Buy Now Pay Later (BNPL), secondary loans, tertiary lease-to-own (LTO). The graph below shows the important differences. 





Primary (credit cards)

Synchrony, Citibank, CFNA

  • Lower interest rates
  • No down payment for the customers
  • Longer no interest promos 
  • Helps with repeat business and branding
  • Pays your shop within 24-48 hours
  • No recourse if customer defaults
  • Mainly offered to larger groups/brands
  • Lower approval rates of applications, typically up to 40% approved
  • Some customers do not like credit cards
  • Hard hit on their credit
  • Charges the shop a transaction fee, 

BNPL (loans)

Wisetack, Affirm, Afterpay, DigniFi, DelayPay, Sunbit

  • Lower interest rates
  • Shorter no interest terms
  • Very popular with the younger customers
  • Customers can set up automatic payments
  • Pays your shop within 24-48 hours
  • Typically no recourse
  • Lower approval rates of applications, up to 50% approved
  • Some require customer down payment
  • Charges the shop a transaction fee

Secondary (loans)

EasyPay Finance, American First Finance, Snap! Finance Loan

  • Higher approval rates of applications
  • Shorter no interest promotions
  • Customers can set up automatic payments
  • Can help consumer’s credit 
  • Multiple credit tiers, different APR offers
  • Pays your shop within 24-48 hours
  • Typically no recourse
  • Higher interest rates
  • Some require a down payment or application fee from customer
  • Might not be available in your state
  • Some charge a fee

Tertiary (LTOs)

Acima, Snap! Finance Leasing, Koalifi

  • Highest approval rates of applications
  • Shorter no interest terms
  • Customers can set up automatic payments
  • Pays your shop within 24-48 hours
  • Typically no recourse
  • Super high interest rates once you convert their “lease factors”
  • Some require a down payment or application fee from customer
  • Might not be available in your state
  • Does not help your customer’s credit
  • Typically require 80:20 or 70:30 parts to labor ratio
  • Some charge a fee

We strongly suggest you select one good credit/low-interest option from the primary or BNPL sections and one not-so-great/higher interest option from the secondary or tertiary sections. Doing so will provide 80-90% of all your customers with a payment option when they cannot afford to pay outright. Here are the questions you should ask when talking to them:

  1. What is the length of your no-interest promotion for my customers?
  2. If my customer doesn’t pay in the promotional period, how does it affect them? Do they have to pay the interest accrued during the promotional period?
  3. What are your interest rate options for my customers? If an LTO, what is the equivalent range of interest rates? (make sure they provide the lowest and highest, some of them go as high as 600%!)
  4. Is there any recourse for my shop if the customer defaults?
  5. How and how quickly do you pay my shop for the services?
  6. Are there any fees charged to my shop - monthly or transactional?
  7. Do you provide free marketing material - pamphlets, posters, etc.?
  8. Will my customer ever be required to pay a down payment or application fee?
  9. How do you handle customer disputes? Do you listen to both sides?

Best Practices When Implementing Consumer Financing

Don’t use the word “finance” or “credit card”

Customers tend to put up a wall as soon as you say either of these words. Call them your payment or no-interest options. Your customers will be more likely to inquire about them and apply.

Don’t prejudge, offer to everyone

Just because a customer drives up in a fancy car doesn’t mean they couldn’t benefit from having a payment option. Remember: 78% of Americans live paycheck to paycheck. The truth is most consumers are too embarrassed to inquire about it when needed.

Have you ever heard “Let me talk it over with my spouse.” or “Let me think about it”? Most of the time, this is their way of saying “I can’t afford this right now.” 

And don’t forget people who like to use other people’s money (the no-interest options), may have the cash but would rather not spend it at the moment, or simply looking to start or better their credit. 

This is why you should offer payment options to every person that walks through your door. Instead, find a way to advertise it in your lobby and on your social media pages and websites. Provide a means of submitting an application to your financing partners without your customer having to ask. This could easily be solved with QR codes, text-to-apply, etc., and most of the finance companies supply marketing materials at no cost to you.

Offer it early and often

The ideal time to mention payment options is when the customer hands you their keys–even if they’ve only come in for an oil change. A $40 oil change? Yes…If your technician inspects the vehicle as they should, what happens when they find bad news? If you mention it beforehand, you’ve already planted the seed for any unexpected, expensive repairs.

Educate your customers

No matter what APR they receive, coach them about paying the balance within the no-interest period–especially if they were approved with a higher interest rate offer. In most cases, this will help increase their credit score for the next time and save a lot of money. This is also a great start to fostering long-term, loyal relationships with customers. 

Have Options for Every Customer

You should have two options for your customers–one for those with good credit and one for the rest. Only 30-50% of customers qualify for your primary and BNPL options. Adding a second will cover 80-90% of all your customers’ needs! 

Make sure you ask the right questions before signing up for finance options to determine which are best for you and your customers' long term. 

By implementing these best practices, you should see a huge increase in your bottom line. There are shops that have added over $500,000 annually when standardizing these into their daily routines! 

Final thoughts, your favorite DVI and workflow provider just might be integrating with some of these options in the near future!

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