Pre-owned financing in high demand
Karin Gelschus, Contributing Writer
December 26, 2011
Filed under Features
Dealers turn to pre-owned financing sources to maximize sales and revenue
Savvy powersports dealers are seeking out sources of pre-owned financing to fully capitalize on the market’s high demand.
“The used market continues to be strong in powersports right now, and if dealers want to maximize their profitability, gaining pre-owned financing sources is a must,” said Amy Kneeland, strategic accounts manager of GE Capital. “Having pre-owned financing available means never having to turn away a trade-in because the dealer lacks an avenue to resell it.”
Consumers are starting to make their way back into the stores. Those that have been holding off on a new unit purchase are now coming in ready to buy and want to trade-in their pre-owned unit. There are other customers who want to purchase a unit but are more comfortable with the lower ticket price on the pre-owned.
“There appears to be a pent-up demand for used units with the downturn of the industry over the past several years,” Kneeland said. “People are holding their pocketbooks tighter, and purchasing pre-owned units instead of new units is one way of managing their finances.”
Dealers who secure financing for pre-owned units are also able to increase revenue streams in other segments of the business.
“By providing the dealer with an alternative source of financing other than cash, dealers are able to sell ancillary products such as parts, warranties and apparel,” Kneeland said. “The GE OEM programs pay between 1-2 percent participation, allow for extended warranties and certain types of insurance on the backend, which all increase dealer profitability from the F&I desk.”
Pre-owned financing also allows dealers to start a long-term relationship with new customers.
“More customers are considering the purchase of a pre-owned unit as they have seen, in many cases, the price of new models increase year-over-year,” she said. “When a customer walks into the store, the dealer is going to sell him or her on a new unit first, but if the customer isn’t ready to pay the higher ticket price, a pre-owned unit is a great option. The dealer is earning a customer that will more likely come back to the store when he or she is ready to buy new.
“People are getting good values and are taking advantage of being able to get a very nice product for a fraction of the cost.”
Pre-owned financing interest rates range from 8.99-21.99 percent depending on credit worthiness, Kneeland said.
“The interest rates are higher for pre-owned than new, and some dealers may feel they can’t sell those higher interest rates,” she said. However, “used financing gives the customer an option to purchase when they might not otherwise.”
National lending options
While some dealers opt for their local credit union or bank, other dealers are unaware there are pre-owned financing options available for powersports. When dealers don’t provide pre-owned financing options, it can result in a significant amount of lost sales.
“Dealers won’t take in used units if they’re not sure they can get them back off their floor,” Kneeland said. “For the customer who comes in and wants to buy a used unit, offering pre-owned financing is a great way to close the sale.”
Dealers, regardless of their size, that sell a manufacturing brand for which GE provides financing are eligible for the GE pre-owned financing programs. Some of the OEMs that GE has aligned with include Kawasaki, Polaris, Yamaha, Suzuki and KTM.
There are several benefits for dealers to use a national lender, including the ability to get an instant credit approval and contract the customer the same day, Kneeland said.
“This eliminates the possibility of losing the sale because they let the customer walk out the door to get financing before signing the contract and delivering the unit,” she said.
Other benefits include competitive rates, longer loan terms in some cases, up to 2 percent dealer participation, and industry specialists for underwriting, funding and customer service.
“GE provides a one-stop-shop for dealers to finance both their new and used products,” Kneeland said.
Pre-owned financing can help dealers be a one-stop-shop for used units as well as help build and maintain strong customer relationships.
Kneeland added, “It keeps your customers loyal to your store.”