Credit: No-interest terms capture consumers’ attention

Home Inside FCNews Credit: No-interest terms capture consumers’ attention

February 4/11, 2019: Volume 34, Issue 18

By Lindsay Baillie


It’s no secret that offering financing to a consumer can be an important step in closing the sale. When purchasing big-ticket items such as new flooring, it can be easier for consumers to pay for the purchase over time rather than having to dole out thousands of dollars in one sitting. However, instead of simply offering a credit solution, dealers should consider what terms of financing truly capture consumer interest.

For Adam Pace, chief financial officer of Metro Floors in Lancaster, Calif., any “same-as-cash” offer works well with customers. “It is basically free money. The reason financing works well is it’s easier for a customer to swallow 18 equal payments of $278 rather than paying $5,000 all at once.”

Pace attributed consumer interest in monthly payments rather than one-time, big-ticket purchases to the auto industry. “Look at the fact that they have 84-month loans on new cars, just to make the monthly payment lower. No one looks at what they are paying in total—just the monthly payment.”

Many flooring dealers find success offering 12 to 24 months with no interest financing. Crest Flooring, Allentown, Pa., for example, offers 12-, 18- and 24-month programs at 0% daily. What’s more, the retailer occasionally offers 36 months at 0%, which he said is the store’s most successful promotion. “We’ve run them twice annually since 2013 and they are always extremely successful,” Steve Weisberg, president, told FCNews. “Financing has become part of our DNA.”

While some retailers find success offering up to three years with no interest, some stores prefer to stay within the one- to two-year range. Case in point is Craig Phillips, president of Ohio-based Carpet Country in Twinsburg and Barrington Carpet & Flooring Design in Akron. Phillips noted 18 months is the longest term his stores will offer. “Our floor pricing does not accommodate the ability to pack on large interest rates for longer terms to the customer. Therefore, the most we offer is 12 to 18 months no interest. Interest charges for terms longer than 18 months are too expensive in our mind.”

Phillips said the only time his stores offer longer terms is when buy downs are available during manufacturer national sales. “Consumers will occasionally ask for longer terms, but not offering it doesn’t really have any negative impact for us,” he added.

Charles F. Zeigler & Sons in Hanover, Pa., offers its customers credit solutions through Synchrony Financial. “Our customers prefer one year or more with no interest,” said Bill Zeigler, president.

In addition to offering financing, Zeigler also tracks other home furnishing retailers in his area to determine what credit terms work best for them. “The stores offering 24 months up to five years with no interest seem to be charging much higher prices for their merchandise. I don’t necessarily agree with this method, but it is apparently working for them.”

George McMurtry, owner of America’s Carpet Outlet in State College, Pa., said a small but growing segment of customers are expecting the store to provide some form of free financing. For McMurtry, this includes extended terms such as six, 12 and 24 months, as well as other options. While the store does offer these terms, he said it sometimes encounters customers who expect to pay the same price as those who are not financing. “Customers who are interested in financing certainly do not want to feel they are paying a higher price vs. someone who is not financing the same purchase,” he explained. “However, we do see the occasional customer who knows we offer financing and demands a lower price if she chooses not to finance her purchase. Our approach is to simply suggest we don’t ask how a customer intends to pay before we tell her the final purchase price.”

Despite offering consumers the option of financing their purchases, America’s Carpet Outlet finds the largest percentage of its customers are more interested in using their own credit cards—many of which offer rewards such as cashback and gift cards. He noted that many of his customers demand and expect the store to take all major credit cards.

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