Here’s how to maximize the effectiveness of long-term loans


As cash flow gets tighter for many people, longer-term loans are becoming more popular as a tool to help reduce their monthly payments. According to data from J.D. Power, some 45% of loans on the used-vehicle side are for 84 months, and it appears the new-vehicle segment is likely very close.

The popularity of longer-term loans can provide an opportunity for your dealership. You will have to work at methods to stay in contact with customers who, left to their own devices, likely won’t be coming in every three years or so to trade in for what’s new on the lot.

But it also presents an opportunity for product upsell to people who expect to hold onto these vehicles for a long time, and need to keep them in good shape to better maintain maximum equity over the life of the loan. It requires planning at the showroom level, and then later on, working in conjunction with the service department.

In the showroom

Longer-term loans, tailored to your customer’s needs, can allow them to get into the vehicle they want and that best suits their needs. If someone has come in with a particular model in mind – perhaps one they’ve seen on your website – then walk them through it, but look for opportunity.

As you know, people often want something they’ve seen or heard about, especially with first-time buyers, but they don’t necessarily take all the variables into account. Where and how they drive, if they have children, if they camp or cottage, how much they want to tow, or their must-have features could all affect the vehicle that’s best for them, but they might feel that the one that is may not fit their budget. A longer loan term with lower payments might, and your effort to get them into the “perfect fit” could make them more likely to recommend you to others.

In the front office

Once they’ve decided on a vehicle, many people aren’t all that interested in hearing about add-ons, and customers with longer-term loans aren’t likely to be inherently different in that regard. What is different is that, because of how long they’re financing the vehicle, you will have products available that are designed to best protect their investment.

Service contracts are the obvious first choice here. The financing terms will outlast some, if not all, of the vehicle’s factory warranty, and repairs are not inexpensive. It’s a careful balancing act of convincing a customer that an extended warranty’s peace-of-mind is worth its cost, without setting up the potential for buyer to think it’s a necessary expense because the vehicle isn’t going to be reliable.

If the vehicle is a necessity – to get to work, to get children to daycare or family members to appointments – go over the benefits of a plan that includes roadside assistance once the vehicle’s factory coverage expires, along with a loaner vehicle. Many people believe their only option is an auto club membership; and many are also unaware that service contract plans can be available for used vehicles, as well as for new.

This is also the time to talk about protecting the vehicle’s equity. Rustproofing, paint and fabric protection, and anti-theft measures become even more important when the buyer will be hanging on to the vehicle for a long time. Emphasize that these can help keep it in top shape, and maintain as much of its resale value as possible over the long term.

In the longer term

It’s vitally important to remain in touch with these long-term customers, because they’re likely not coming back in to trade for quite a while. On a fairly regular basis – of course in keeping with regulations on privacy and customer consent for contact – send out a “Hi, how are you, how’s your vehicle” message to keep your store top-of-mind. Offer a bird-dog, in cash or goods, if your customer sends someone your way who buys a vehicle from you.

Your dealership’s service department is also vital to retaining these long-term customers, and it’s as important to look at what vehicle owners aren’t doing, as well as what they are. If a recommended maintenance schedule has come and gone, it likely means your customer is going to a fast-lube store or big-box store’s service department. Send out a two-for-one oil change coupon offer for your dealership – buy your first one, get your second one free. Contact the owner with a reminder before the spring or winter rush for switching tires, and if that doesn’t bear fruit, consider sweetening it with an offer such as tire storage. Check the daily service department appointments, and if your customer’s coming in, drop by to say hello and offer a coffee. You’re both in it for the long term, so make it count.