Usury and Upselling at Dealerships

usury Automotive News reports on an important advance in business practices within corporate capitalism’s auto-industrial complex:

Service orders and profit have jumped at Garber Buick in Saginaw, Mich., since the store started offering credit-card applications and interest-free credit to cash-strapped customers.

When a service customer declines suggested repairs or maintenance beyond the reason for the visit, a store representative sits down with the customer to explain financing options, said Bobbie Herron, director of digital sales and marketing for Garber Automotive Group’s four Michigan stores.

If affordability is the problem, and often it is, the dealership offers to help the customer fill out a GE Capital credit card application. The financial services company often accepts or rejects the application within minutes, Herron said.

If the application is rejected, Garber Buick has arranged with CrossCheck Inc., a provider of check approval and guarantee services, to guarantee as much as $4,000 in repairs interest-free so long as the customer can pay the balance by check in a month, Herron said. The plan requires 25 percent of the bill to be paid upfront and the remainder paid within 30 days.

“It’s work that would have been denied because our customers didn’t have the funds,” she said.

Auto News doesn’t report what percentage of people who don’t have the cash to pay for car repairs and are rejected for a new credit card are typically able to pay off their new CrossCheck tab within 30 days, but it certainly has to be almost none. Any guesses as to what interest rate kicks in after 30 days? It can’t be low.

Hence, a more-than-100% growth in profits on a 40% hike in repairs:

Herron credits the financing initiative, launched three months ago, for a big boost in service work. Over the past two months, monthly repair orders have risen from 125 yielding net profit of $8,900 to 175 generating $19,750, she said.

And here’s the “work” of the car dealership, the labors that unleash such economic wonders:

Herron said the initiative grew out of a strategy session five months ago during which she met with Garber Buick’s general manager, Rich Perdue, and other employees to devise a way to increase customer-pay service work.”