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the Keynote of
^Successful
oelline
H E instalment method of selling mer-
chandise has advanced in leaps and
bounds during the last twenty-five years.
It is much easier to sell an article for
one hundred dollars or more if it is sold at $10
down and $10 per month than it would be to
sell the same article for cash. The instalment
method secures a larger number of purchasers
who are able to supply themselves with the
necessities and some of the luxuries because of
this method of selling. While instalment sell-
ing is productive of a large amount of business,
it is absolutely necessary that contracts be
turned into cash and this is where the collec-
tion department steps in and makes this method
of selling a success. An instalment house with-
out a good collection department might just as
well go out of business; it is a vital necessity
and so recognized by all successful instalment
houses.
The various forms of contract known as the
security vary from chattel mortgages to condi-
tional sale contracts. In some States the con-
tract takes the form of a lease, the property
being merely rented with a provision that upon
the payment of a certain specified sum which
is the purchase price, the title to the property
will be conveyed to the lessee. The laws of
the various States make it necessary to sell in
such manner as to conform to the State statutes.
It would not be possible in this article to go
into all the various methods of selling which
prevail in all States. I will take up the two
most prevalent methods, the chattel mortgage
and the conditional sale, and for further in-
formation I will refer you to your own State
statutes on the subject.
In selling on a chattel mortgage, a note or
notes are taken for the balance due on the pur-
chase price. These notes are described in the
mortgage which is given as security for the
payment of the notes. The title passes when
the goods are sold to the purchaser who gives
the mortgage as security for the payment of
the notes. It is necessary to record this mort-
gage to prevent a third party from purchasing
the merchandise from the customer and secur-
ing title to it. In this way notice is given to
any subsequent purchaser that the goods are
not fully paid for. If he then purchases he can-
not retain the goods, but must surrender them
to the mortgagee, who by recording holds a
first mortgage.
T
By R. J. CASSELL
Formerly Collection Manager,
Grinnell Bros., Detroit
R. J. Cassell
may be recovered if you conform to the law on
Conditional Sale Contracts
the subject. In fact, all that is usually neces-
A conditional sale contract is practically a sary is to send your truck and most delinquent
promissory note with certain conditions an- customers will allow you to reclaim the prop-
nexed. The title remains in the vendor until
erty. This is known in instalment selling as
the full amount is paid. There is usually a
repossession. Instalment selling, as stated, in-
clause which states that after full payment has
creases the volume of your business, and is
been made the vendor will convey the title to
widely used by thousands of houses all over
the vendee. The States differ in regard to the
the United States. The losses from this method
matter of recording or filing a copy of these
are comparatively small if the house has a good
contracts, so I will not attempt to give you
collection department.
Capital Required
It is obvious that a sufficient amount of capi-
tal must be at hand if you are going to place
your goods on instalment contracts. Doubtless
this shortage of capital has been the downfall
of many instalment houses. The banks will
sometimes loan to a dealer, taking his note and
also collateral security in the contracts; there
must, as a rule, be at least twice the amount
of dollars in collateral as the amount loaned.
This method enables a merchant to secure
money with which to finance his business if •
selling on the instalment plan.
The turnover is slow; if you sell on thirty
months' time, your turnover would average fif-
teen months if the payments are made each
the law on this subject. The conditional sale
month. You can see how vital it is to have
contract is to my mind the most satisfactory
an efficient collection department that the pay-
method of selling, if the laws of the particular ments may be made exactly according to con-
State in which business is to be transacted
tract.
recognize this form of contract.
Importance of Collections
Some dealers prefer to sell on a lease rather
This matter of available capital is a big prob-
than a chattel mortgage. As stated, the lease
lem to every instalment dealer, and I cannot
is merely a rental form used with a promise
impress upon my readers too strongly the very
to convey title after a sufficient amount has
vital importance of a competent collection man-
been paid in the form of rent to cover the
ager and an efficient collection system. Instal-
purchase price.
ment sales are not real sales until the collec-
There is a book published by the Ronald
tion department have secured at least one-third
Press of New York City entitled "The Law of the purchase price. The instalment sale can
of Conditional Sales," by F. B. Haring, which
be made much more secure if the first payment
covers this matter of contracts thoroughly, and
is of good proportion. But this in turn les-
is of great value to dealers.
sens the number of sales, so the safe method is
Advantage of Instalment Selling
to be prepared, and preparation means a good
collection department. The salesman should
In selling on a contract, the goods are given
(Please turn to page 19)
as security. If payment is not made the goods
The necessity of collect-
ing payments promptly
is stressed by collection
expert who discusses, as
well, some of the prin-
ciples and purposes of
instalment selling gen-
erally.
5