How to Increase Sales in the New Year Leverage Consumer Confidence and Gain a Competitive Edge With Biweekly Payment Programs

by US Equity Advantage | Jun 22, 2015

Lower gas prices combined with a stronger economy and improving consumer confidence produced robust car sales in the final months of 2014. November auto sales were the strongest in years, according to Reuters, including Chrysler which reported its best November sales since 2001.

Another trend influencing the market is the average new-car loan term that reached an all-time record of 66 months. Cars are getting more expensive and car buyers are extending the terms of their loans in order to lower the monthly payments. Unfortunately, longer loan terms often carry higher interest rates which increase the total cost of buying the car. For dealerships, it means the value of the car at pay-off is less resulting in a lower value to sell or trade toward a new car purchase.

With analysts predicting the sales trend to continue in 2015, auto dealerships can expect the competition for customers to intensify. One strategy for savvy dealerships to gain a competitive advantage is by offering customers the option of a biweekly payment program. Rooted in the home mortgage sector, this financing option is finding success nationwide with auto dealerships and their customers.

How does it work? Standard loans require one payment every month. Biweekly payment plans debit a customer's monthly car payment every two weeks. Because there are 52 weeks in a year, the borrower makes 13 payments over the course of a year (instead of 12) with the extra payment applied to the principal. The benefits to the customer include shortening the term of the loan, saving money in interest and putting them in a better equity position to trade in sooner.

The customer’s convenience of budgeting for half-payments can translate to the dealership’s ability to move more product, sell more services and generate greater profit. As evidence, dealerships have been shown to sell approximately 57 percent more F&I products on biweekly deals as opposed to standard retail deals.

Recent regulatory attention given to biweekly payment products may give some dealerships undue pause. The National Automobile Dealers Association (NADA) has advised its members to be aware of the specifics of the F&I products they sell and ensure their staff are properly trained to accurately disclose all fees and costs and not overstate any potential benefits. Reputable biweekly loan payment processors have practices in place that promote full and accurate disclosure of their products and put the customers’ best interest first and foremost.

So, what questions should a dealership ask when choosing to partner with a biweekly payment program provider?

  • –Most importantly, is the company licensed, bonded and compliant with all of the regulatory issues relevant to the marketplace including state money transmission licensing, Federal FinCen registration, NACHA network operating rules and guidelines, and the Electronic Funds Transfer Act (EFTA) related to customers’ transactions?
  • –Does the company provide dealership and agent team training by professionals who are knowledgeable about the regulations governing the biweekly loan processing and automotive industries?
  • –How does the program integrate with a dealership’s menu system and DMS?
  • –Does the company measure in real-time and accurately report performance metrics such as dealership profitability and sales at both the group and individual store level?

This year could be an even more highly profitable one for auto dealerships that leverage the economic recovery and consumer confidence by adding a biweekly payment program to their finance offerings.

Robert Steenbergh is CEO and chief compliance officer for US Equity Advantage, an industry leader in providing biweekly auto loan payment programs, partnering with dealerships in all 50 states, including two of the major public auto groups. The company has processed more than $1.3 billion in transactions with an A+ rating from the Better Business Bureau.

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