COVID-19 Retail

Pandemic Paves the Way for Secondary Financing

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Pandemic Paves the Way for Secondary Financing

Thousands of tire dealers across North America have turned to no-credit finance providers as a way to reach more customers and capture additional sales at the front counter. And now, with the economy in a constant state of uncertainty thanks to COVID-19, dealers say this service is even more critical.

David Warwick, director of operations at Bruneel Point S Auto & Tire, which is based in Boise, Idaho, says the dealership’s 11 stores began offering secondary financing from West Creek Financial Inc. in June of 2019. The service is already making a difference in the company’s sales. 

“There is an entire customer base out there that wants and needs the very same things as every other customer, but may not have the ability to purchase the necessary services,” says Warwick. “It’s become an important tool for us in providing an alternative where there may not be another one and giving everyone the same opportunity to make their vehicle safe and purchase necessary products and services.”

After one year, Warwick estimates that sales enabled through West Creek’s secondary financing program account for 5% of the dealership’s overall revenue. On average, those invoices total $900 to $1,000, he says.

“In the past, this type of interaction would turn into a ‘I need to save money’ response. With West Creek, we are able to assist our customers with immediate purchases so they feel good about the safety of their vehicles.”


Modern Tire Dealer talked with representatives from six companies that offer secondary financing and leasing in the tire and automotive world, as well as Synchrony LLC, a primary, traditional lender. All of them addressed how COVID-19 has affected the market for their product. Here’s their take on the current environment.

Matthew Dishman, senior director of national sales for American First Finance Inc. (AFF): “Due to COVID-19 and state shutdowns, many primary lenders tightened their lending practices, thus increasing the opportunity for secondary financing.” 

Clint Cowley, chief revenue officer for Kornerstone Credit LLC: “With COVID- 19, the importance of offering consumers secondary and tertiary financing options is stronger than ever. Due to uncertainty in the job market and the current economic climate, several first-tier providers have modified or increased their underwriting requirements. This has opened the opportunity for secondary and tertiary finance partners to step in and offer services to a broader customer base. Financing has adapted and evolved to the current business environment and as services resume, there has been a greater demand for financing products. Having different options available can create a competitive advantage for any tire dealer or auto repair shop owner. Consumers are looking to stretch their savings further and simple payment programs are a great way to do so.”

Steve Surman, vice president of marketing at Prog Leasing LLC, dba Progressive Leasing: “Foot traffic in retail stores is obviously down due to the closure of retail locations, quarantines, limits on the number of customers in a retail location at any given time and social distancing.

However, this dynamic has been somewhat offset by greater online retail activity. Lease-to-own purchase options are ideally suited for critical purchases whenever cash or credit is tight. This is as true now as it was before the present pandemic.”

Ryan Slobodian, chief of staff for Snap Finance LLC: “There has never been a more critical time to offer secondary financing. The speed of the economic upheaval, combined with forbearance and other payment relief programs, created challenges for primary financing lenders, causing them to pull back on lending. There are now customers that no longer have access to primary financing but still have purchasing needs. Secondary financing is the solution.”

Matt Welton, senior vice president of sales and marketing for Tempoe LLC: “Fortunately for the tire industry, companies were considered an essential business and therefore were able to stay open during the initial phases of the shutdown across the country. Due to the high spike in unemployment rates and the concern from institutional lenders about high delinquencies, many of the payment providers in the space, unfortunately, had to either pull back on approvals with lower approval amounts or lower approval rates. 

Others temporarily suspended lending and leasing activities for the first month or two of the pandemic, while others shut down permanently. These pullbacks put a strain on some tire dealers as they lost sales tools to help their customers in their greatest time of need, especially for those that may have recently lost their jobs.”

Josh Borgstrom, vice president of sales at West Creek: “Safe transportation is always a necessity for those who are still on the road. In this turbulent market, consumers need all the support and payment options available. Offering secondary financing gives customers the flexibility they need to keep their vehicles running safely. If you’re not offering secondary financing, you’re pushing traffic to a competitor who does.”


MTD also posed additional questions to representatives from secondary financing Providers: 

MTD: What’s the single biggest perk of offering secondary financing?

Dishman, AFF: “Saving more sales and adding repeat customers are the biggest perks of offering secondary financing.” 

Cowley, Kornerstone: “The biggest perk is the ability to offer customers a way to stretch out their savings. For many, this is an option that wouldn’t be available otherwise.” 

Surman, Progressive: “Customer satisfaction. Offering lease-to-own purchase options to customers who might not qualify for traditional credit helps these customers acquire the tires they need to keep themselves and their families safe, whenever the need arises, without having to compromise and settle for unsafe or underperforming tires. The result is satisfied customers and more sales.”

Slobodian, Snap: “While there are many reasons to offer secondary financing, the biggest perk is offering a solution to the 40% of consumers who may not currently see your business as an option for their tire and automotive service needs. When tire dealers offer secondary financing, they’re able to provide financing solutions to an entirely new customer segment.”

Welton, Tempoe: “With the current economic crisis impacting just about everyone, customers are being stretched thin on their disposable income. Many do not have the cash nor the credit easily available to acquire essential needs, such as tires or wheels. Offering an alternate payment solution for the consumer at the point-of-sale is fast and easy, allowing tire dealers to service a higher number of customers without having to turn them away, while not having a negative impact on their margins.”

Borgstrom, West Creek: “Ease of use, without a doubt. Most tire dealers that we work with have never used a third-party financing solution. These dealers have no problem with our intuitive and simple interface. When you have customers in the shop and a list of things that need to get done, your financing partner should be the least of your worries. Consumers might fix additional items, if offered financing, versus coming back at a later time. New customers who are shopping for finance options will bypass dealers who don’t offer and talk about their financing options.”


MTD: For those dealers who have so far resisted offering secondary financing, given the current economic climate, what’s the most important thing for them to reconsider now?

Dishman, AFF: “More than 60% of adults have less than $400 of disposable income.“

Cowley, Kornerstone: “Consider that many of your customers and potential customers who may have been able to pay upfront or qualify for first-tier financing before may not have those options anymore and won’t be able to purchase what they need without secondary or tertiary programs.

“When you offer new finance programs, it is a win-win situation. The customers can take home what they need, and you improve your bottom line.” 

Surman, Progressive: “Retailers who don’t offer a lease purchase option may find themselves unable to serve the nearly 35% of Americans with subprime credit.”

Slobodian, Snap: “There are many customers who no longer qualify for traditional credit. Offering secondary financing allows businesses to reach these people. Owners and managers should consider the history  and stability of the financing company they choose to partner with and should consider the company’s history, funding sources and customer service scores, such as net promoter scores.”

Welton, Tempoe: “The key thing to keep in mind is that no one truly knows what another’s situation is. We cannot judge and make decisions for other people based upon our own wallets. Everyone should be given a chance to make their own decisions as to whether they want or need a product or not. If this current economic environment has shown us anything, it’s that there are no guarantees about tomorrow, and we should all do what we can to plan for future success. 

Borgstrom, West Creek: “You never know which of your customers need financing until you ask. This has always been the case, but even more so in today’s economic climate. Dealers often have a certain picture of what the secondary financing customer looks like or what their background is. “Now more than ever, it’s important to remember that any one of the customers walking through your door may need secondary financing, and it’s important to start the conversation.

“We encourage all of our dealers to get the word out that they offer secondary financing,” he says. “The customer won’t know it’s an option unless you tell them. Not offering financing is basically saying ‘no’ to your customer who wants to shop with you.

Snap Adds up to 60% of Sales

Felix Almestica III is the director of operations for the 13 stores and two wholesale locations that make up Best Tire Center LLC in Fort Worth, Texas. (Seven locations in Texas operate under the Tires to You banner, while eight locations do business as Best Tire Center in Washington.) The stores offer tires, wheels, alignments and accessories, but no automotive service.

When the first Tires to You stores opened in 2015, “we were struggling to get people in the door,” says Almestica. 

Adding Snap Finance LLC became a lifeline for the dealership. Because financing provided by Snap is not based on a person’s credit score, Almestica says it was a good “middle ground” that made the conversation at the counter easier. Customers didn’t want to open a credit card, but liked the idea of having a line of credit that they could use, pay off and reuse later. “There were days (when) if we hadn’t had Snap, we wouldn’t have had sales at all.”

Almestica said sales made through Snap Finance have grown to represent 60% of any of his store’s total income. On top of that, the stores have seen customers opt to buy extras that were recommended to them “because of Snap,” rather than cutting away at things to make the ticket fit into their budget.

‘Financing has Become More Relevant’ 

Perhaps the largest of any of the finance providers is Synchrony LLC, whose Synchrony Car Care program is available at more than 35,000 automotive parts and service locations nationwide, including many tire dealerships. Synchrony also offers traditional financing: a retail credit card, with approval based on a customer’s credit worthiness. Still, Steve Roe, senior vice president and leader of payment solutions for Synchrony, says demand for credit options is on the rise due to the COVID-19 pandemic. 

“Financing in the automotive aftermarket industry has been prevalent for 30-plus years, but demand has been growing during this pandemic,” says Roe, noting Synchrony has added more customers to its program. “Shops should proactively offer financing to stay competitive.”

Roe says that Synchrony’s consumer surveys have shown that 76% of Synchrony cardholders always seek promotional financing options when making a major purchase. That has remained true during the pandemic. Synchrony says a tire dealer who proactively uses consumer financing typically will have average repair orders that are two-or-three times higher than if they didn’t have financing. Since the arrival of COVID-19 and its economic impact, Roe says automotive businesses are seeing customers use a combination of tax returns, stimulus checks and increased unemployment benefits, along with the deferred interest offered by Synchrony Car Care.

“Financing has become more relevant,” says Roe. “Shops are offering consumer financing more often and making sure people know they have a variety of different payment options.”

And here’s one final plug from Roe as to why tire dealers should offer financing. “Synchrony Car Care is not just a consumer financing program. It creates strong customer loyalty with six out of every 10 customers who will use the card again in the same shop within the next 12 months.”

Tempoe Helps Consumers Make Safe Decisions

Sandra Munoz is operations director for Burleson, Texas-based Alwahban Texas Tire LLC, which does business as Texas Tire. She says offering secondary financing through Tempoe LLC “is one of the reasons we have been able to grow at such a fast pace. 

“Due to COVID-19’s financial impact, a lot of people are not able to pay up front to get a new set of tires that can run up to $1,000, especially now that a lot of us are relying on our vehicles to get around. Tempoe has given them the ability to get their tires replaced and be safe on the road without having to pay the full price up front. 

“Secondary financing has helped our sales by over 50% by giving our stores great approval rates and amounts that give our customers the ability to make purchases they otherwise wouldn’t be able to make,” notes Munoz.

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