Cell phones have become expensive over time. You would think that the more expensive the phone, the longer it’ll last. But if there’s anything your POS software will tell you is that this is far from the truth.
The reality is, people need more phone repairs than ever. And they have started upgrading their phones more frequently. So, despite the hike in prices, the need for upgrading still exists.
According to research done by Gallup, 44% of people upgrade when their cell phone provider allows them. At the same time, 2% of cellphone users upgrade when the latest model is released.
The data directs us to conclude that upgrading phones is more about affordability and less about the latest technology.
So to further understand the market dynamics of financing cell phones, we spoke to an expert on financing phones, Brandon French, founder of PayVantage. From how to finance phones to how cell phone repair shops can benefit from it, we covered it all.
Brandon’s idea of financing is providing the capability to customers to purchase devices. And it’s a perfect option for people who are unable to acquire big credits for purchases. In this way, they can make a good credit history and own the device at the end.
“Basically, what we do is we give a buying capability to customers with a typical subprime credit score. So people that are credit challenged, maybe don’t have the ability to get a big credit, can use it. We’re providing options for them, to where they all have the ability, the path to ownership for the newest, latest, and greatest cell phones.”
He further explained how with the changing times, the need for financing has increased. Cell phones have become more of a status symbol. So, everyone wants the latest phone but not everyone can afford it.
With cell phone financing, Brandon says all customers can afford an expensive phone and are potential expensive phone buyers. However, making a sale is still a long road.
“Times have changed quickly. And every customer now. They want the newest, latest and greatest phone. And it’s hard to sell those. Suppose the customer doesn’t have a financing alternative, right. It’s tough to get someone to walk in and say, I have a thousand dollars cash for you to buy the new iPhone 12”.
But before we further talk about device financing, it is important to know the difference between financing and leasing. Because they’re both different concepts, although people may use them interchangeably.
Cell Phone Financing VS Leasing?
Financing and leasing cellphones are two sides of the same coin.
In financing, a customer gets to make monthly payments within a set period. And the payments will ultimately add up to the total cost of the cell phone. Then, the customer will be able to own the device completely. Whereas leasing is more like paying rent for the device that you’re using and you don’t own it by the end of the lease period.
On the other hand, in financing customers don’t have an option for an early upgrade like in leasing plans. With leasing, you may be able to upgrade, but you have to pay some charges to switch the phone.
For instance, if you finance a $1200 cellphone, the customer will pay $60 every month for, let’s say, 24 months. It means that when the term is up, the customer would have paid off the cellphone. In the case of leasing, the customer will have to give up the cell phone or upgrade to a new leasing plan.
As far as the monthly installment is concerned, financing does cost a little more than leasing. But in the former, you get to own the phone. Moreover, anyone can get financing, even someone with a low credit score.
What’s in it for cell phone repair shops?
Most cell phone repair shop owners have no idea how beneficial third-party cell phone financing can be for them. But those who do can see results in their POS software.
To help you understand the concept better, we have listed down the benefits of third-party financing.
Ability to sell your inventory
Your inventory management POS software tells you you’re languishing in making sales. So, you want to sell your inventory items faster. You can do that by collaborating with a third-party cell phone financing company like Payvantage, Acima, etc.
Now you don’t want your payment hanging over a year. Guess what? You don’t have to worry abt it because you get paid upfront by the financing company. You don’t even have to ensure that your customer is paying the financing company on time or not because the company takes care of it.
Brandon shares his experience of paying the repair shop within two days and then collecting the money from the customer according to their payment plan.
“When a customer comes in, if they’re approved for Payvantage, which most of them are, we’ll pay the repair shop in two business days, and then I’ll collect the money from the customer. So, you know, initially, we’re creating those relationships with the dealers, and then we have a relationship with the customer afterward”.
So, it is a win-win situation for you and your customers.
Huge profit margins
We’ve already established that people don’t upgrade or buy expensive phones because they can’t afford them. So when you’re providing them with a way to do that easily, without breaking the bank, they are more likely to make the call.
Brandon explains the substantial profit margins that cellphone repair shop owners can earn through big-ticket items.
“So the profit margin is huge. We have dealers that are making 50 – 70 sales in a month. So, you know, do the quick math, 70 times, $200 profit or $300. It’s a very big opportunity for small shops to make big money. And it gives customers buying power”.
Increase in cash flow
Sales are a way to make quick money. We say this because, unlike repairs, a sale is made within a matter of minutes.
The best thing about offering cell phone financing for repair shops is that you get full payment of the financed device upfront from the financing company. You don’t have to wait until the customer has paid the complete amount to be paid for the sale.
So device sales improve your cash flow and your POS software reports will reflect that.
Sounds too good to be true, right? Well, some third-party cell phone financing companies don’t charge an extra fee for a sale. This means you get to keep the entire profit.
Selling cell phones through third-party finance companies allows you to trade-in. While pitching a sale for a new cell phone, you can trade in the same device. Fix it and sell it to the next customer.
Here your repair shop software comes in handy. Every time a customer comes in, your employees can quickly go through the trade-in items and sell the device.
Brandon explains the concept pretty well,
“Like it’s so much more profit, especially for repair shops, because typically you can take phones in, on trade for the meager cost to fix them up at low cost and sell them at a premium price.”
Some third-party financing companies provide financing solutions for trade-in devices as well. So, for you, it’s an added opportunity to earn more.
Requirements for getting a third party financer on-board
Like having a repair shop software for your cellphone repair shop has become the need of the hour, similarly having a third party financing company also helps multiply your revenue.
The following things are a must-have to be able to qualify for most third party cell phone financing collaborations:
- You need to have a repair shop that fulfills the legal requirements of the state you are operating in. It can either be a brick-and-mortar store, a kiosk, etc.
- You need to have an inventory.
That’s it. That’s how easy it is to start your third-party financing collaboration and generate more revenue.
We hope that the information given above can help you understand the concept of financing devices.
If you are looking to increase your repair shop POS software inventory, check out the best cellphone repair parts suppliers in the United States.