May 14, 2007 – Gauging the importance of F&I’s retail impact

It’s no secret that low interest financing and other special F&I packages have driven consumers into auto dealerships. But do special financing offers translate as well in the motorcycle market?
That question was addressed in the J.D. Power and Associates’ 2006 Motorcycle Competitive Information Study. Similar to years past, the response from motorcyclists was an overwhelming no. Nearly 60 percent of respondents said special financing offers had “no influence” on their decision to purchase a bike, compared to only 18 percent who said that it was a “strong influence.”
Still, dealers are reporting some success with special financing programs, with more expensive brands or models garnering a higher degree of interest from consumers in regards to different finance options.
“Harley-Davidson does quite a few promotions, and they seem to be quite effective,” said Jason Wilmoth, finance manager for Skip Fordyce Harley-Davidson/Buell in Riverside, Calif. “In the past they never really did anything, but now they have programs with no interest and no payments for several months.”
Donny Bruce, sales manager for Independence Harley-Davidson/Buell in College Station, Texas, says although the direct impact that special financing has on sales is minimal, it helps get customers interested in the product and build brand awareness.
“Through Harley-Davidson we have not seen a direct impact like with the offer of $99 a month on Sportsters due to the program itself,” Bruce said. “But it’s a good program to get people in the door and build more interest in the brand. It drew more phone calls. Then it was our job to draw them in and we were able to build a finance program to serve the customer.”
Manufacturers say when marketed correctly, special financing packages can have a significant impact on influencing a buyer’s decision.
Cliff Frazen, manager of retail finance for Yamaha Motor Corp. USA, says financing programs are best received when advertised on a national level first, something his company has focused on more in recent years.
“Special financing programs provide a moderate to strong influence in the buying decision, especially if tied to a nationally advertised campaign,” Frazen said. “These programs have had more impact in recent years due to aggressive promotions within the industry as a whole. However, promotions are also impacted by changes in economic conditions.”
Bruce Stjernstrom, director of marketing for Kawasaki Motors Corp. USA, adds that in the retail industry, consumers expect to have a competitive retail offer available, which is what his company aims to accomplish.
Importance of Low Payments
When asked what their consumers focused on most when discussing financing, both dealers and manufacturers pointed to annual percentage rates (APR) and monthly payments.
Doug Davis, sales manager for Neosho Powersports in Neosho, Mo., believes “that 75 percent (of consumers) are looking at special programs, such as $89-per-month payments, or zero/zero/zero programs, or 6.9 percent for the first two years. They’re very payment conscious, even if it’s only for the first two years. They want a low payment up front.”
Yamaha’s Frazen said “many customers are very responsive to low payments offered on our Yamaha Card program, and others respond well to low APRs with extended terms on our installment program. The degree of success depends on the product targeted.
“Our current ‘Get Out and Ride’ campaign centers around an 8.9 percent APR with low payments until 2009 on the Yamaha Card,” he continued. “This is great for customers who are payment sensitive or on a budget. In addition, we have a 7.9 percent APR for 72 months on new Star Motorcycles, the V-Max and the FJR1300. This installment offering is great for customers who are not payment sensitive, but are still looking for value in financing options. Both programs have been very effective. Also, we recently announced a trial pilot of a Yamaha First-Time Buyer program to assist customers with a limited credit history.”
Kawasaki’s Stjernstrom agrees that APR seems to be a growing concern for consumers, and that Kawasaki has tailored its financing programs to give buyers a choice.
“We currently have three finance programs,” he said, “that allow customers to decide which financing package fits their budget best. They include a zero down/zero payment option for six months; a revolving APR at 7.99 percent that converts to 10.99 percent after 24 months; and a 9.99 percent APR for life plan. The revolving APR option is the most popular program of the three.”
The Future of Financing
Both manufacturers and dealers agree the future of financing is a bright one, especially considering the real estate refinancing boom has tapered, and that there are more first-time buyers who want to buy a bike with no cash down.
“We feel with the slowing of real estate cash-out refinancing during the past 12-18 months, motorcycle and ATV financing is becoming more of a factor to the average buyer today than it was, say, two to three years ago,” said Dirk Gould, sales support and finance manager of America Suzuki Motor Corp. “We expect this trend to continue this year and most likely into 2008, and as a result Suzuki will continue to offer competitive retail finance promotions though our dealers that will allow customers to experience the joy and lifestyle of owning one of our motorcycles or ATVs.”
Wilmoth of the Riverside, Calif., H-D dealership sees “zero down as a popular trend right now” even though the dealership does not advertise it.
“Another trend is competitive interest rates, but they’re going up,” he said. “People are going for longer loans, as the interest rates are high. I see some loans going up to 10 years. People want special programs, and I think it’s driven by the car industry. A lot of people are looking for zero down; they want to hold onto their money. We don’t see too many all-cash deals anymore.” psb

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