It’s Saturday morning on Memorial Day weekend. The inflatable tube man is in perpetual motion, burgers are sizzling on the outdoor grill, and the television ads have been running for days. Your auto dealership is ready for its big, big marathon holiday sales event.
You close out the preparations with a sales meeting. It’s “all hands on deck.” There are boxes of gooey donuts, pots of hot coffee, and a cadre of sharp-dressed sales people with their chins up. Your general manager delivers a pep-talk that would make the legendary Knute Rockne take notice.
- Industry Stats Affecting Auto Sales
- Down Payment ‘What Ifs’
- Down Payment Solutions
- What Is the Best Down Payment Solution?
Sure, you’re going to demo a lot of cars this weekend, but how many more units could you sell if the hefty cost of making a down payment was more affordable in this day and age? Here’s what you need to know.
Industry Stats Affecting Auto Sales
Authorities offer numerous statistics from a variety of angles. A few have relevance to the points made here:
- Memorial Day and most holidays truly are great times buy and sell a new vehicle.
- The average price of a new light vehicle is $37,401 according to Kelley Blue Book (August 2019).
- Only about 35% of new cars are now priced under $30,000, compared with 54% in 2012.
- The average price of a used light vehicle is $20,486 according to CarGurus (August 2019)
- The down payment on a new vehicle is typically 20% while one on a used vehicle is 10%.
Down Payment ‘What Ifs’
What if you are selling a car for the average price of $37,401 and the buyer was placing an average 20% down payment? What if they don’t have the financial reserves to make such a down payment?
Placing an average down payment on an averaged priced vehicle is going to cost the buyer $7,480. Many people — even those making six figures — can’t afford that. “Why not?” you may ask.
Recent stats from the Federal Reserve Board’s 2019 “Report on the Economic Well-Being of U.S. Households” show that once again, a significant number of households would have trouble paying for a hypothetical unexpected expense of $400.
“Sixty-one percent said they would pay the expense with cash, savings, or a credit card paid off at the next statement; 27 percent would borrow or sell something; and 12 percent would not be able to cover it,” wrote the Fed in its press release.
One need not be a mathematician to calculate that a $7,480 down payment on a new car is totally un-doable if a $400 unexpected expense is un-affordable.
Down Payment Solutions
Buyers can certainly place less than the $7,480 down, but that translates to larger total amounts to finance and larger monthly payments.
Leasing is another option. Leasing a new vehicle requires a smaller initial payment (aka “cash due at signing”), but the monthly lease payments aren’t much better than monthly purchase payments, and the agreement means that shoppers don’t own the vehicle at the end of the lease term.
What Is the Best Down Payment Solution?
The short answer is that CrossCheck has an affordable solution called Multiple Check. This future deposit function gives consumers short on cash a little extra time to complete down payments. Take the $7,480, for example.
Using Multiple Check, car buyers write 2 – 4 checks all with the same purchase date to cover down payments. Dealerships deposit the checks on dates selected by buyers over a specific term (usually 30 days).
Dealerships receive guaranteed funding from CrossCheck as each check is deposited, and buyers get to drive home the car of their dreams on the purchase date. It’s a win-win for both buyers and sellers. (Multiple Check becomes even more streamlined when used in conjunction with Remote Deposit Capture, a fast type of electronic processing.)
Download our free guide to learn how Multiple Check can help your dealership increase sales and mitigate risk while saving time and money.