There are many things that cause dealers to lose sleep, but these days, high interest rates likely top the list. Because it's been about 15 years since interest rates have been at this level, many of today’s sales professionals may find themselves challenged to overcome them with customers. That’s why Zach Hetterick, CEO of executive coaching firm Harvesting Potential, member of the Machinery Advisors Consortium (MAC) and a former dealer executive, says dealers will have to coach their sales teams to be successful in this new environment. 

In his presentation at the 2023 Dealership Minds Summit, he offered 3 areas of focus in coaching a sales team to excel in a high-interest-rate environment: the information they need to gather about prospects, creative financing options and cost-of-production pricing

This article will address the second of those 3 focus areas: creative financing options.

According to Hetterick, understanding ways to be creative with financing is necessary to help salespeople overcome the unique financial challenges a customer will be facing when investing in a new piece of equipment in the current environment. 

“The risk that we're going to have to overcome is the customers that we locked in 2 years ago that are on 36-84-month contracts,” he says. “They're able to sit on those contracts. They bought them pre-price increases. They bought them pre-inflation and pre-interest rates. And now we've got to find ways to push product into the pipeline.”

Buying Down Rates

Getting creative with financing means thinking about what will drive purchasing behavior for the particular customer. One approach that Hetterick saw a salesperson use effectively was buying down the interest rate. If the salesperson knew competitive dealers around him were using the same programs and they were at a 7% interest rate, Hetterick says, the salesperson would call his finance rep and buy the rate down a quarter point. This gave him a couple of advantages.

“It gave him a little bit of an advantage over his neighboring competitors,” he says. “But it also gave him the ability to push a pressure point. It gave him the ability to say, ‘Hey, I made a call to a finance company with this situation. If we can do something in the next 2 weeks or the next week, they're willing to give you the 6.75%,’ even though he was phantoming the deal and doing it on his own.”

Interest Waiver Power

Interest waivers are another approach salespeople can use, and Hetterick recommends coaching salespeople on the power of an 18-month waiver. “The ability to put a waiver in August and carry a customer for 2 seasons and sell him on the vision of trading them the following December or converting him to another option,” he says. “But understanding the power of the waiver — of the ability to pour those first 2 payments into equity and show him what that looks like on an amortization schedule.”

Using Balloon Payments

Hetterick says balloon payments are another option, although he cautions that they are only useful with a particular type of customer: one who plans on owning the machine for 10 years, after which he’s either going to refinance it or trade it. 

“We're looking at him from the position of trying to keep him from getting upside down,” he says. “And surely a cashflow buyer.”

Hetterick adds that an irregular payment schedule is an option, as well, which will be helpful for customers who have perhaps had an off season. 

Split Rates

The final creative financing option Hetterick recommends salespeople get familiar with is split rates — 2.9% for 36 months, for example, followed by another rate. “They act much like a waiver,” he says. “However, it's tying the interest rate to the buying cycle of the customer.”

According to Hetterick, it’s not necessary to use all of these options. Instead, it’s important for your sales team to understand which customer segments they work with. 

Confidence to Think Downstream

Hetterick thinks the biggest challenge salespeople face when selling is confidence in putting numbers in front of customers — numbers that maybe the salesperson doesn’t like. When coaching them, he thinks it helps to teach salespeople to have the confidence to think downstream for the customer. 

“So we understand that the price and the cost have increased,” he says, “but walking them through that flow of cycle: ‘In 3 years, you're going to have 900 hours, and this is what it could look like, and this is where we feel like you'll be in a respectable position. When do you like to trade?’ And asking those questions.”

Salespeople often talk separator hours with customers, Hetterick says, but he thinks it’s important to go deeper and get into a cost/benefit analysis on a per-acre or per-hour basis. “With the data that you have at your disposal, there are even dealers who are talking to customers on a per-bushel basis,” he says.

Know the Repayment Terms

Customers lose confidence in salespeople when they do not understand repayment terms, Hetterick says. “You've laid it out, you've walked them through the amortization schedule, you're showing them the inflection points of when they should trade, and all of a sudden they say, ‘Well, what happens if I pay off early?’ And you haven't done the due diligence to understand the caveats of the plan.”

Understanding all of the repayment terms before putting a quote in front of a customer is important, particularly when doing creative financing options, as well as understanding the key terms of the contract and the rationale behind it, because Hetterick says it builds “the confidence to that customer that you're a trusted advisor.” 

Applying the Right Pressure

Hetterick says that most recently, salespeople have used equipment availability — or lack thereof — to apply pressure to the customer and get them to make a buying decision. In the current environment, he says it’s important for the sales team to learn how to make those creative financing programs the time-sensitive pressure point. 

“It's not going to be one of those deals where, ‘I'll get back with you in a week,’ or ‘I'll get back with you tomorrow. Try to make that time-sensitive,” he says. “Because the longer you sit on the equipment at these rates on your lines of credit, the more it's going to cost you, too.”

Part 1: Gathering Information About Prospects

Part 3: Cost-of-Production Pricing