NATDA Magazine Sept/Oct 2015 - Page 69

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. OPEN 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. 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, m