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Consumer Financing 101

As the season kicks into high gear, we've been hearing from more and more independent bike retailers that customers are asking for financing when they come into their shops. Now is a perfect time to cover the key fundamentals of consumer financing, and uncover some of its myths:

Customers Use Financing At Other Retailers...And Expect You To Offer It Too

Customers are used to having financing offered to them when they shop at other stores, whether it’s by a sales associate, advertisement or signage.

When customers come to your store, more and more of them are expecting that you will have financing options available, particularly if they are planning to make a large purchase. If a customer planning to buy a bike walks in expecting to be able to use financing and you don't offer it, at best you've disappointed them. At worst, you've lost the sale.

Financing Incentivizes Customers To Return To YOUR Store

Why? When customers get approved for financing through our Freedom To Ride program, they receive a card with your store's name on it.

Retailers have been offering store cards for decades because they know it encourages loyalty. The next time a customer plans to make a purchase, they are far more likely to go to the store where they have a line of credit and whose card is in their wallet.

You're Not Putting Your Customers In Debt By Offering Financing

In fact, you’re actually putting them in better financial position than if you accepted their credit card instead. With a credit card, the customer has just one month to pay off their balance before the higher rate on their outstanding balance kicks in. With financing, you’re giving your customer the opportunity to pay off that balance over an extended period of time, without penalty.

Let’s be frank - if you’re choosing not to offer financing because it’s a moral issue for you, then you really should not be offering credit cards as a form of payment either.

Don't Assume A Customer Who Uses Financing Can't Afford What They're Buying

In many cases the opposite is true. Smart customers will use financing so that they can make their money work for them, by putting it in an interest-bearing account, an investment that earns dividends, etc.

For example, a customer who could easily afford a $5,000 bike may instead choose to use 12-month financing so that they can get their bike now while earning interest or dividends on that $5,000 over the course of the year. They will make the required payments each month, pay off the balance at the end of the 12 months, and now have extra income earned on that $5,000 by not having spent it in one lump sum.

"The Bike Cooperative’s 12 month financing has increased our units per transaction and overall average ticket amount. The Freedom to Ride Card allows the customer the comfort of making the purchase today and having plenty of time to pay it off. It also generates repeat customers since they now have a line of credit in our store."

-Nate Gernert, Summit City Bicycles & Fitness

The Bike Cooperative introduced consumer financing to the bicycle industry in 2003 with our exclusive Freedom to Ride program. Click here for more details.

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