The equipment above is an investment, and not everyone has the cash sitting around today to purchase it all, even though it would be good for the business. In this post we discuss financing.

We recently wrote about the winning Return-On-Investment formula we use to help shops build a business plan. We highlighted the importance of estimating how many vehicles you could be calibrating to generate a revenue forecast, and then comparing that to the upfront cost of the equipment. With that, we backed into a payback period on the equipment.

In this second part, we discuss how financing the equipment can be a capital-efficient way to get into ADAS calibrations today. While there will be more payments over time compared to buying upfront today, it allows businesses to better manage their cash flows and spread out the cost of the equipment over time. In addition, it allows shops to immediately get into ADAS calibrations, versus waiting to save enough to purchase the equipment and forego ADAS calibration revenues in the meantime. 

With financing, the most important metric is making sure that the monthly payments are easily being made, with profits as well.

We work with a couple of different buy-now-pay-later and credit partners, including Affirm, Paypal Pay Later, and Vista Capital. For smaller transactions, PayPal and Affirm are well-positioned to break up the cost of the equipment into more manageable payments, especially if you are a sole proprietorship or solo operator. Vista Capital works with a variety of equipment loan providers to get you the best payment plan. 

An Illustrative Example With Financing

Let’s take an example of an ADAS calibration tools bundle that costs $25,000. Illustratively, Vista may offer a 60-month payment period and only requires the first month payment in advance. If the business owner has good credit, that could be $528.48 per month for 60 months, with the first month paid upfront. What’s nice is that the monthly break-even is 2+ calibrations – a relatively achievable number! 

Monthly Payment For $25,000 Bundle With Good Credit = $528.48

Rule Of Thumb: 2.1% of the equpment cost could be your monthly payment, assuming good credit

So let’s see how this works, again taking the formula from last week:

For a medium-sized collision shop–let’s call them Ace Body Shop–that does 80 cars per month, identifies ~30% of vehicles needing ADAS calibration, calibrates on average 1.3 systems per repair order, and has a per-calibration price of $300, that is monthly revenue of:

80 × 30% needing ADAS calibration = 24 cars
24 × 1.3 calibrations per repair order = 31.2 calibrations
31.2 × $300 = $9,360 in monthly ADAS revenue

That means that every month the shop is generating $9,000+ of revenues, and their payments are only $528.48. It’s clear that the company will be able to make the payments no problem, and that the payments will become relatively smaller as the number of calibrations that the business performs increases.

So with financing, what’s important is that you more than break-even on the monthly payments, and that you have sufficiently good credit to let our credit partners underwrite you and your business.

Financing makes sense for shops confident in their volume but looking to preserve cash or accelerate their timeline. Run your numbers through the calculator, and if you want to talk through your options, call us at (925) 566-8545 or email sales@adasdepot.com.

Want to run these numbers for your shop? We built a calculator to help you estimate what the ROI could look like based on your specific volume and pricing, although this is only for a cash purchase. Try it here: ADAS Depot ROI Calculator.