Going into 2013, offering financing options to customers can greatly help dealers to close the sale. While consumer debt is down overall, spending on credit is up. Dealers can benefit greatly from a customer's desire to make a purchase if they have credit options available at the point of sale.
"In today’s environment where many budgets are stretched, there are numerous benefits of using consumer credit programs," says Gary Slagle, general manager, Outdoor Power Equipment industry, for GE Capital’s Retail Finance business. "For consumers, a credit card that is used for outdoor yard and garden equipment or services increases buying power by providing access to special financing and enabling the consumer to get the unit they need or want without tying up other credit cards or using savings, which may be needed for emergency or day-to-day purchases."
Consumer debt and purchasing trends
While consumer debt has continued to decline over the past four years, falling by $74 billion in this year's third quarter, non-mortgage household debt is up. According to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit, non-mortgage household debt balances jumped by 2.3% in the third quarter to $2.7 trillion, boosted by increases of $18 billion in auto loans, $42 billion in student loans, and $2 billion in credit card balances.
This data suggests that while consumers are paying down their mortgages, they are still turning to credit for many expenses and purchases. To help grow consumer spending, many creditors are offering some of the best financing options in years with low interest rates.
"Our most popular program in 2012 was a 0% for 48 months," shares J.C. Hendrix, chief sales and marketing officer for Sheffield Financial. "We have agreed with most of our major OEMs that we will continue to offer this program in 2013 along with our other low-rate programs."
While consumer confidence plays the biggest role in spending, new and innovative products encourage customers to buy new equipment and take out credit for their purchases. This is where the desire to have the next greatest thing on the market paired with available financing options helps secure the sale.
"With the industry ever changing by adding higher-priced and more-productive units like the zero turning-radius mowers and others, we continue to see our customer base increase significantly," says Hendrix. "In fact, in 2012 we saw our finance volume in the outdoor power equipment industry more than double over 2011."
Dealers should touch on their financing options in marketing effort during peak purchasing times. Hendrix says most all contractors buy in April, May and June depending where they are located in the U.S.
"Southern customers buy in April and May with the Northern tier coming in early June," explains Hendrix. "That means 53% of purchases come in months March-June and 34% in months August-December."
More dealers take on credit
Dealers wishing to build their customer base and grow sales continue to take on creditors so they can extend that convenience to their customers. Again, it helps the customer purchase the equipment they want while giving dealers another tool for closing the sale.
"Our dealer base continues to increase," says Hendrix. "Low-interest and low-payment programs continue to be a valuable tool for dealers as well as customers when selling and purchasing equipment."
Commercial customers especially should be taking an interest in the financing options available as it helps them to grow their business. Revenue made from the use of equipment allows them to quickly pay down low-interest financing.
"Our dealers can offer attractive finance programs which enable the commercial cutter to generate revenue during the term of the loan," explains Hendrix. "For the commercial cutter that uses these programs to assist in the purchase of their equipment, along with all of the tax benefits, it makes it an easy decision for them to purchase now instead of paying cash. In other words, let the equipment pay for itself during the normal course of business."
To encourage customers to consider financing a piece of equipment, mention its availability early and regularly in all of your marketing efforts and print materials. Be sure employees are knowledgeable on all programs and benefits. Those benefits extend to the customer and the dealership's bottom line as well.
"Financing is an important factor in a consumers’ choice of an outdoor power equipment merchant, according to the Major Purchase Shopper Study commissioned by GE Capital’s Retail Finance business," says Slagle. "Research confirms that consumers are prudent about making outdoor power equipment purchases, and poised to spend on larger ticket items, with financing being an important consideration in the research and purchase process. In fact, the availability of financing drives the final choice of an outdoor power equipment dealer for about 40% of all shoppers."
