As a business it is easy to benefit from impulse purchases if you are offering products for a few dollars, but how can you have those same results with products that cost $1,000 or more? People tend to plan for large purchases. They take their time to decide because a large payment can have a negative impact on their budget.

Converting large-ticket item purchases from planned buying to impulse buying is only possible by using affordability tools so that each payment is way below the preferred cost and the customers can comfortably make instant decisions.

Let me give you an example from my personal experience with a sports club in San Francisco. When I visited this club to watch a friend play tennis, they offered me a membership on a payment plan with $99 monthly payments. Just being impressed by the well-equipped gym facilities and indoor courts, I didn’t see any harm in filling out the forms on the spot that came with a 36-month membership requirement (here membership requirement really means payment obligation).

If the club limited the sign-up option to an up-front payment of $3,600, I would probably do some planning and realize that with my busy work schedule, I wouldn’t be able to use the club more than once a week, and paying per visit would be a much better financial decision than becoming a member.

The club simply used the payment plan as an affordability tool to get each payment under the preferred cost level that gave me the buying power and resulted with an impulse purchasing decision.

When you have a customer at your dealership, you want them to commit to a purchase because we all know that your chances of closing on a customer that leaves your store without any purchase commitment is significantly reduced.

Using financial tools to increase their buying power can blur the line between the planned and impulse purchase. This may result in more of your dealership visitors deciding on a purchase when they are still in front of you so that you can control the following steps to close the sale.

Preferred Cost
Calculate the preferred monthly cost for your customer base and work with your financing partners to tailor financing options to match those numbers as much as possible. For example, if your goal is to keep the preferred monthly cost below $150, review which loan repayment term or lease residual value can help you accomplish it so you can promote those programs.

Your preferred cost may vary for different vehicles based on the target audience, estimated income and estimated credit level. You may promote different financing options based on these differences.

Price Tags
At your dealership, price tags, as well as the online inventory listings, should provide the estimated monthly payment together with the price of the vehicle. The monthly payment amount should be more prominent than the price if most of your customers will likely choose a financing option.

Flexible Financing Instead of Discounting
In many cases, you will be able to achieve your customer’s goals by tailoring a financing program instead of simply providing a discount. If your customer has a target down payment amount or target monthly payment amount, you may meet that range by customizing the repayment term or another component of the financing offer.

Use financial calculators or payment estimators to simulate different scenarios. The key is getting the conversation away from discounting and achieving the customer’s goals using the financial tools available to you. But keep in mind that eliminating a 5% discount might mean a 50% increase in your net profits if your net margin after all expenses is around 10%.

The key is getting away from discounting and achieving the customer’s goals using the financial tools available to you.

Upsell Opportunities
For the additional products and services, the incremental increase in the monthly payment will be nominal and much easier to sell compared to asking for payment upfront. Take advantage of financing to upsell accessories, rider gear, service contracts, GAP policies and other products.

It may be challenging to sell a $1,000 service contract to a cash buyer, but it is much easier to add it to financing if it only increases the monthly payment amount by $20. Now you are convincing your customer to go for a $20 payment instead of a $1,000 up-front cost.