The good, the bad and the liars – the three types of ‘cash’ buyer

Do you take credit cards?

Sorry if you think that opener was a bit weird, I was trying hard to get your attention, focusing on the burning question of how customers and prospects pay for their metal box with a wheel at each corner.

The funny thing is, when I first came into the car job we very rarely took any type of plastic for any type of payments at all. It really is amazing to think of the incredible evolutionary steps we have taken as an industry in the last few years, so I wanted to address the ‘elephant in the showroom’ of how people pay.

Cash up front

First of all, you’ve got your cash customers, you can split them down into good and bad savers. The good savers have sacrificed treats and experiences, holidays and events for months and years squirrelling away cash wherever possible in order to buy their next car.

These customers can be fastidious, usually highly detail oriented and very difficult to change their mind when it comes to payment. Nearly all of them will understand the responsibility of risk, though, that what they buy might be entirely their problem from day one if it’s not right. However, they may not know that if you fund it for them then they have a tri-partite agreement – three parties all with a vested interest to resolve any potential problems, usually amicably. Consider telling them – it might just secure you some finance business.

Unexpected cash buyers

The second cash customer is the bad saver – they have money, but it has ‘happened’ to them. Perhaps a windfall, a legacy from a will, winnings on the horses or something a bit more *ahem* anonymous.

Whatever the reason, these customers know that once the money has gone it is unlikely to be replaced, and right now they can see it in the bank, languishing like some warm safety blanket that they’ve never experienced before.

It might be worth sharing with them that you could fund their purchase and leave the money intact – their worries about repayments or debt are void as they have the liquid cash to settle at any time. Just a thought.

Non-existent savings

The third cash customer is the BFF, or Big Fat Fibber. They stare you in the eye like some master poker player, smile and reassure you the cash is simply sat there in their account at the bank, but in fact they are strapped up to the eyeballs or worse with intricate loans, credit cards, overdrafts and mortgages.

It’s worth sharing with this sort of customer that your motor finance funders take security in the car and not in the person unlike the banks. The bank doesn’t give a damn what the customer spends their money on, the security for the bank is the person and yet the worst a motor finance company can do if life throws them a curve ball is repossess the vehicle. Problem solved.

This is also a pretty good method when one of the ‘I don’t do finance’ brigade come along. You know the type, they haven’t a clue about the safety, security or peace of mind that comes with every tripartite agreement, which pretty much all of the motor finance operators in the UK offer.

Don’t be afraid to share with them that debt is only debt if they don’t have the cash to wipe it away. If they do, then they are using a financial product wisely giving them payment by instalment, peace of mind that the money is there every day just in case they need it, and of course that perennial cherry of a tickle of interest on the capital every month. Nice.

By the way, the BFF is not a good or a bad saver, they are a borrower that either can’t or won’t tell the truth. I apologise again dear reader if your delicate nature is offended at the thought that some customers may tell fibs, I’m off to wash my mouth with carbolic.

Education or support

The line at the top of this piece seems ridiculous to all of us operating in automotive retail and even more so for our younger colleagues who probably aren’t aware that just a few years ago it was rare to see a credit or debit card in the showroom. But let’s remember that customers simply can’t buy what they don’t know about. It remains our job, yes even in 2022 it remains our job, and our duty of care to ensure that each customer is offered any product that may support, protect or assist them to achieve their best outcomes.

You might be sitting back now thinking: “Ahhh yes Andy, I get that, but I don’t know anything about finance.” Well, I suggest you learn by forming a close and trusting working relationship with a good funder or broker who will look after your clients on your behalf.

You may want to go all out and retain control of the finance process and the resultant profits, which will mean you will need to be FCA regulated. This sounds complicated but it doesn’t need to be – reach out and ask for help, it’s there ready for you.

You may prefer to work alongside a trusted partner as an appointed representative. This option still leaves you with an element of workload for compliance, and will cost you fees, but the benefits will almost always outweigh the cost. Plus, you will have the ongoing day-to-day support and guidance of experts. Just choose wisely and retain control of your own business decisions.

And if you’re unsure, please remembers what Dale Carnegie famously said:

“Inaction breeds doubt and fear, action breeds confidence and courage, if you want to conquer fear do not sit at home and think about it – go out and get busy.”

YOUR ACTION PLAN

• Remember finance makes money, sells cars and provides a gateway to products like Gap, warranties and more
• Ask customers where their money is coming from and truly listen to their answers
• Help your customers by offering products that will keep them and their money safe
• Work directly with the FCA if you want complete control and all the proceeds, or…
• Work indirectly as an Appointed Representative of a principal firm

By Andy Tong