Need to increase gross profit? Why not start by increasing down payments? Everyone in Special Finance knows down payment is the key, but when and how to ask for it can totally change the outcome. You may have a plan, but is it a good one?
The only way to increase down payments from customers is to ask for large down payments. The problem is that most salespeople, in an attempt to pre-qualify or prepare customers to put money down, ask for the money too early in the sales process. If in the initial qualification and customer needs analysis (CNA), the salesperson starts hammering the customer on down-payment, one of two things will happen.
- The customer will get scared because many customers are pre-conditioned to say zero down or at most $500. Customers have been coached by many online “authorities” to never disclose the true amount of money they can put down. When a salesperson is persistent in their attempts to move the customer up, it creates conflict too early in the sales process, well before a customer has selected and been approved for a vehicle.
OR
- The salesperson will acknowledge that the customer has stated zero or $500 down, thereby validating the statement from the customer. Because the salesperson doesn’t or can’t handle the statement now, it automatically sets up a conflict for later in the sales process when you should actually ask for all the money.
It’s not as tough as salespeople make it to increase down payments. Although customers come into the store stating they have zero or $500 down, deep down they know it will take more to buy the car they want. Customers can’t go to a BHPH store and buy a car with zero down. Who in the world would expect to do it at a quality dealership such as yours? Try adjusting your process as follows and increase gross profit instantly.
Stop asking for down-payment at all in the initial meet and greet and customer interview.
You have to earn the right to ask for money and so far, at this stage, you haven’t earned it. Take the question out of the early sales approach and leave it for later. By not asking upfront, you don’t have to worry about getting the wrong answer. Getting all the money is the job of management, not the salespeople. In successful stores, the salesperson shows the vehicle and presents the numbers that management gives them. It’s not their decision how much money it takes so it makes no sense that they are attempting to sway the customer at all on this topic. A salesperson should be seen as a customer’s advocate, not his adversary. Take all conflicts off their plate and let them be the person working with the customer, not against them.
Sell things in the right order.
Now that the customer has selected a vehicle that they can buy and been given a proper demonstration with features and benefits, here is where the salesperson becomes a factor.
- Sell the vehicle.
- Sell the dealership.
- Sell yourself.
These are the reasons that a customer will now find more than the initial down payment they had budgeted for the purchase. Once they know they can actually buy and drive home the vehicle they now love, the pain of additional down-payment becomes a non-factor.
Ask for 30 percent down.
It should be standard dealership procedure to ask for 30% down on every first pencil. After doing so, the negotiation becomes based on a down payment, not a price. If you were unsuccessful in getting 30% the first time, reduce the second pencil minimally. If you jump straight to 5%, you are destroying the story and credibility of the first pencil. Finally, upon agreeing to an acceptable down payment, always send the customer into the finance office without discussing sales tax. This is an easy bump for any Finance Manager. They won’t get it every time, but they will get it some of the time –if they ask every time.
It’s time to increase down payments and increase gross profit!
Everyone asks for a down payment, but maybe you’re asking at the wrong time. Now more than ever, timing is everything. The time it just right and you will increase gross profit instantly, make it your time!