In today’s market, consumers want flexible financing
options. In turn, dealerships need the ability to offer multiple
financing options. The two basic categories of lending are
revolving credit and installment loans. Revolving credit allows
customers access to a certain amount of money that doesn’t
have a final date to be paid off. As payments are made and
the customer is up to date and not behind in payments, more
credit becomes available. An installment loan is a loan that is
repaid over time with a set number of scheduled payments.
It is important to be knowledgeable about both financing
options that are available and how they can help both you and
your customers. Dealerships offering both types help ensure
that their customers find the right financing for their trailer
purchase.
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Here are some key differences in revolving credit and
installment credit:
Payments – Revolving credit options require a minimum
monthly payment based on the current balance. This causes
the monthly payment amount to change, lowering as the
balance is reduced. Installment credit requires a fixed term
and payment for the duration of the loan.
Costs – Dealerships usually pay a fee to accept and/or offer
revolving credit.Visa and MasterCard fees may be higher
at some dealerships than fees associated with private label
credit cards. Private label cards are branded credit cards that
can only be used at that store.
Application Process – Customers can quickly apply for
revolving credit, with an answer usually provided in seconds
on the credit application. Installment credit requires further
documentation and stipulations from both the dealer and
applicant.
Approvals – Revolving lenders set up an open ended line
of credit. As long as there is available credit, customers can
make repeat purchases with their private label credit card.
Installment lenders provide a closed-end line of credit. This
is a fixed amount of money, financed on a specific purchase,
over a specified period of time.
Purchases – Revolving credit allows customers to pay
for new and used trailers, parts, accessories, and service.
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Private label cards typically offer varying promotions such
as deferred interest with payments. Installment loans usually
finance a particular type of unit with age and collateral
restrictions.
Who should I offer financing to?
The short answer is every customer, every time. Many dealers
wait for their customers to ask about financing. However,
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