CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
One of the best ways to close a deal is offering customers a bi-weekly payment plan. Not every F&I menu has a bi-weekly payment calculator, but for those that do, it’s a great way for dealerships to increase gross.
By-weekly payment plans are becoming increasingly popular as a faster way to pay off credit cards, mortgages, autos and similar type loans. Instead of making monthly payments on the loan, the buyer pays half of the monthly payment every two weeks – or 13 monthly payments each year. How does it work? There are 12 payments a year on a regular monthly payment schedule, or 24 half payments. On a bi-weekly payment program (every two weeks) the buyer makes 26 annual payments throughout the 52-week year, which results in the extra monthly payment.
On a bi-weekly payment plan, auto loans can be paid off 6 to 8 months faster. For example, a five-year auto loan that would normally take 60 months to be paid off, can be paid off in 52 months. The customer also builds equity faster so that trade cycle can be shortened.
The by-weekly payment plan is set up using a third party company, also called a transfer company. First, paperwork for the sale is drawn up and submitted to the regular finance company just like any other vehicle purchase. Then, arrangements are made with the transfer company to make the monthly payments. The money the transfer company uses to make the payments is taken out of the customers banking account every two weeks. The money is set aside in an interest free escrow account, and paid to the finance company at the end of them month.
There are no upfront costs to the dealer involved in setting up a bi-weekly payment plan. It’s also convenient, because the transfer company automatically withdraws money from the buyers banking account. Withdrawals can even be arranged to coincide with the consumer’s paycheck. Another consumer benefit is that the buyer’s credit rating improves because the finance company receives their money on time.
F&I menus that have a built in bi-weekly payment calculator make it easy for dealers to offer this plan at the time of sale. The calculator shows buyers exactly what they will pay, and for how long. Most importantly, it helps customers purchase the vehicle they want, including add-ons and options, with a payment plan that they can afford. Which means more satisfied customers and increased profits for the dealership.