Loan arrangers: Shops capturing customers by offering financing

Loan arrangers: Shops capturing customers by offering financing

Most collision repair shops wouldn’t think of letting customers leave with their vehicle without paying. At Keenan Auto Body, it’s starting to happen more often – which is just fine, according to Michael LeVasseur, vice president and chief operating officer of the 7-shop company in the Philadelphia area.

That’s because the company has teamed up with Wells Fargo Financial to offer customers 90-days-same-as-cash financing on deductibles or other purchases at Keenan Auto Body. Customers fill out a brief credit application that the shop then faxes to Wells Fargo. Usually within 20 to 30 minutes, the shop finds out if the customer financing was approved.

“It then takes us just two days to get our money from Wells Fargo,” LeVasseur said. “And another good part about it is when a customer qualifies, they get a credit card, a Keenan Auto Body credit card, in the mail. That credit card is approved for a certain amount of money based on their credit rating. So they might just need $500, but their credit card might be approved for up to $1,000.”

That credit card that stays in the customer’s wallet can become an ad of sorts for the shop.

“We hope that will encourage them to use us again,” LeVasseur said. “It’s also good for up-sells. They can use it if they want to get a spoiler or they want to get another dent fixed that’s not covered under their insurance claim.”

Such financing may be one way for shops to set themselves apart from competitors because it doesn’t yet appear to be widely offered in the collision repair industry. Only about 400 member shops of the Automotive Service Association (ASA) across the country are using a similar financing program – but most of those are mechanical repair shops, according to John Scully, executive vice president of the association.

“Personally I think it should be used more by collision repair facilities for deductibles and accessories because it seems to me it would be a great fit,” Scully said.

Card in hand

The customer financing program available through ASA is called CarCareOne. Underwritten by GE Capital, the financing is available for purchases over $150. Although the GE program is available to virtually any shop, lower fee structures or other additional benefits may be available for ASA members or those with other affiliations such as CARSTAR or NAPA.

Rather than exchanging credit applications and approval notices via fax, the CarCareOne program includes use of a computer terminal provided to the shop on which to submit credit application information.

“They get an answer in 30 seconds whether the customer has been approved or declined,” said Joan Lambert, administrator of member services for ASA. “If the customer is approved, the shop can get its money within 48 hours.”

In one recent year, customers had been approved for an average of $1,762 in credit, and used an average of $861 on their first charge. About 62 percent became a repeat customer within five months (a statistic probably affected by the higher number of mechanical repair shops in the ASA program.)
Gary Boesel of Alpine CARSTAR Auto Body in Aurora, Colo., has used the CarCareOne program for several years.

“It’s a tremendous selling tool when customers come in and don’t have their $500 deductible,” Boesel said. “We’ve had customers use it when they had $2,400 worth of damage and they didn’t want to go through insurance. We see a lot of activity with it especially later in the year when the holidays start coming and money is short for people.”

Boesel said just less than half of customers who apply for the financing get approved.

“Often the people who want to apply are the ones whose credit is already extended,” he said. “So you can look at it two ways: Fifty percent of the people don’t get approved. Or 50 percent do, and we get those jobs. I’ll take that 50 percent.”

Boesel also likes the fact that customers using the financing have the option of getting it for 90 days interest-free, or allowing it to roll over to longer-term financing. The customer also receives a CarCareOne credit card – in Boesel’s case a card branded with the CARSTAR name – that can be used for vehicle service, parts, tires or anything sold at the more than 11,000 participating CarCareOne businesses nationwide.

“So they may leave here approved for $1,000, and after they spend $500 to pay their deductible, they can drive down the street to Discount Tire and buy $200 worth of tires, and then go to Meineke Mufflers and have a new muffler put on with that card, even though it says CARSTAR right on it,” Boesel said.

Let’s talk fees

So what will a collision repair shop have to spend to offer 90-days-same-as-cash or other financing to customers? Fee structures vary, even based on the type of financing you want to offer, so it can pay to shop around. (We found shops paying different fees for the same program through the same provider.)

LeVasseur said Keenan pays a percentage fee on each transaction financed; the longer the financing, the higher the fee. For the 90-days interest-free financing, the fee is 3 percent, so $15 on a $500 deductible.  It’s a bit more than if the customer paid by credit card, but the program is designed to help the shop capture jobs for which customers may not have an alternative way to pay.

“We’re also seeing more customers who always look for ways to keep their money longer,” he said. “Anytime I buy an appliance, I always do the 90-days same-as-cash and just pay it off before it comes time. I have the use of the money during that time. So we’re marketing it to those types of customers as well.”

ASA’s Lambert said that for ASA members, the CarCareOne program has a $35 monthly access fee that includes the use of the computer terminal and all training and point-of-sale materials. There is also a monthly minimum usage fee of $25 to which the percentage-fee on each transaction applies. She declined to provide the percentage fees for each transaction – which again vary based on the length of the loan – but said a shop will have to process about $2,000 in loans per month to reach the $25 minimum usage fee.

Boesel said his company pays a flat fee each month in order to offer the financing program, a fee that doesn’t change whether the shop uses the service a lot or a little.

The bottom line

So are such expenses a good investment for collision repair shops? Shop owner Boesel thinks so. He’s seen an up tick in the market for customer-pay work as well as more customers carrying $500 and $1,000 deductibles. Being able to offer financing for these customers, he believes, will get him work that other shops won’t be able to capture.

“If there’s a customer who comes in and says, ‘I probably won’t get it fixed because I don’t have $500,’ or, ‘I didn’t realize I’d changed to a $1,000 deductible a couple years ago,” then we can tell them we have some options,” Boesel said. “It’s another selling tool, and it works.”

John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988. He can be contacted by email at

John Yoswick

John Yoswick is a freelance writer and Autobody News columnist who has been covering the collision industry since 1988, and the editor of the CRASH Network... Read More

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