Why Offering Financing is Crucial for OPE Dealers

Financing has become a game-changer for OPE dealers, driving loyalty and sales growth in an evolving marketplace.

The Competitive Edge of Offering Financing

In the competitive landscape of the Outdoor Power Equipment (OPE) industry, the ability to offer customer financing has evolved from a simple convenience into a critical competitive differentiator and a primary engine for sales growth. For the modern OPE dealership, a sophisticated and well-executed financing strategy is no longer an optional add-on; it is a non-negotiable component of a successful business model.

The data supporting this shift is compelling: a dealership that actively assists a customer in arranging financing is not only closing a single sale but is also building a foundation for significant future revenue. Studies show that these customers are three times more likely to begin their next equipment search at that same dealership and are two and a half times more likely to make a repeat purchase. This powerful loyalty effect underscores the return on investment that a robust financing program can deliver.

Understanding In-House and Third-Party Financing Models

Before selecting partners or promoting specific products, a dealership owner must make a fundamental strategic decision: will the dealership become a lender itself, or will it partner with external financial institutions? This choice between an in-house financing model and a third-party model dictates the dealership's level of risk, capital investment, operational complexity, and profit potential.

The in-house financing model, sometimes known as 'Buy Here, Pay Here,' involves the dealership extending credit directly to its customers. This model affords the dealership complete control over approvals and creates a significant new profit center. However, it is capital-intensive and comes with significant risks, including 100% of the credit risk and a heavy regulatory burden.

The third-party financing model is the most common approach in the OPE industry. Here, the dealership acts as a facilitator or an agent, connecting the customer with an external finance company. This model completely mitigates the dealer's credit risk and provides immediate access to a wide range of financial products and technological platforms. The main drawback is a loss of control over credit decisions and potential profit margin erosion from promotional fees.

Leveraging Financial Products to Boost Customer Loyalty

Navigating the world of customer financing requires a clear understanding of the key institutional players and the specific financial instruments they provide. Installment loans and revolving credit lines are the primary financial products available to OPE dealers. Installment loans involve a fixed amount repaid over a set period, resulting in predictable monthly payments. Revolving credit lines, often branded as store-specific credit cards, provide customers with a pre-approved credit limit that they can use for initial and future purchases without needing to reapply.

Revolving credit is a potent tool for fostering customer loyalty and driving repeat business. Once a customer is approved for the card, the path of least resistance for future purchases of parts, accessories, and service work leads directly back to the dealership where the card is accepted. This transforms a one-time equipment buyer into a long-term service and accessories customer, significantly increasing their lifetime value to the dealership.

Navigating Promotional Offers: True 0% vs. Deferred Interest

Promotional financing, particularly the ubiquitous '0% APR' offer, is one of the most powerful marketing tools in an OPE dealer's arsenal. However, the term '0% interest' can be misleading, as it is often used to describe two fundamentally different types of financing promotions: true 0% interest and deferred interest.

True 0% interest is the most consumer-friendly type of promotion, where no interest accrues on the promotional purchase balance during the specified period. Deferred interest, on the other hand, means that interest on the original purchase amount begins accruing from the first day of the loan, but it is not immediately charged to the account. If the customer pays off the entire promotional balance before the period ends, all the accrued interest is waived. However, if even a single dollar of the promotional balance remains unpaid at the end of the period, the lender will retroactively charge the customer for all of the interest that has accrued since the date of purchase. Misrepresenting a deferred interest plan as a true 0% offer can lead to severe customer backlash and damage the dealership's reputation for transparency and trustworthiness.

Building a Strategic Roadmap for Seamless Financing Integration

Possessing a strong portfolio of financing partners and products is only half the battle. The true measure of a successful financing strategy lies in its execution—how effectively and seamlessly it is woven into the fabric of the dealership's day-to-day sales process. From the initial customer greeting to the final digital signature, financing should be presented not as an afterthought or a complex hurdle, but as an integral, value-added service that makes purchasing easier and more accessible.

To thrive in this evolving landscape, dealership leaders must build their financing blueprint around five key strategic pillars: diversify their finance partners to serve customers across the entire credit spectrum, integrate financing into the entire sales process, leverage technology like online credit applications and Dealer Management Systems (DMS) to create a frictionless experience, empower their sales team by training them to present financing as a smart payment option, and analyze data and reporting tools to constantly measure what's working and refine their strategy based on hard evidence.

This holistic approach will enable OPE dealers to unlock the full potential of customer financing, transforming it from a simple payment method into their most effective tool for closing the deal.

Looking for a Partner?

A dealer's success is directly tied to their ability to meet a customer's expectations, and in the OPE industry, that means providing a robust, seamless, and well-understood financing program. By carefully choosing your financing partners and products, you can provide a range of options that serve every customer, from the prime residential buyer to the commercial fleet manager. Ultimately, it's about transforming your dealership from a simple retailer into a strategic partner for your customers, giving them the tools and financial flexibility they need to acquire the right equipment. 🤝

We have experience in the OPE industry and are here to help you navigate this changing landscape. If you're considering selling your dealership, or exploring a strategic partnership to take your business to the next level, please fill out the form below.