How to Offer Monthly Payment Plans for Hot Tubs

Helping Customers Access Hot Tubs Through Finance

Monthly payment plans can make hot tubs more accessible for many UK consumers. By spreading costs over time, retailers broaden their customer base and help buyers manage budgets more effectively. Yet, offering finance involves important decisions, regulatory obligations, and potential risks. This guide explains the essentials, so you can proceed with confidence and compliance.

Is This Guide for You?

If you are a UK hot tub retailer considering finance options, or a business owner keen to understand the pros, cons, and compliance of monthly payment plans, this article is designed for you. It’s also useful for those new to retail finance brokering.

Understanding Retail Finance: Key Terms Explained

Before introducing monthly payment plans, it’s vital to grasp key retail finance terms:

• APR (Annual Percentage Rate): The yearly cost of borrowing, including interest and fees.

• Interest-Free Credit: Payment plans with a 0% APR, meaning customers pay only the retail price.

• Credit Agreement: The contract outlining repayment amounts, terms, and conditions.

• Deposit: An upfront payment that reduces the total financed amount.

• Broker: An intermediary (like Kandoo) that arranges finance between lenders and customers.

• FCA Regulation: The Financial Conduct Authority supervises retail finance to protect consumers.

Understanding these concepts is essential, as they frame compliance requirements and shape customer expectations.

Monthly Payment Plan Options for Hot Tub Retailers

Retailers have several choices when offering finance to customers:

• Interest-Free Credit: Popular for big-ticket items, it spreads payments over 6 to 24 months, attracting buyers who want predictable costs. Retailers often absorb the interest cost as a sales incentive.

• Interest-Bearing Credit: Spreads payments over longer periods (up to 60 months), but with added interest. This can make premium models more affordable but increases the total paid.

• Buy Now, Pay Later (BNPL): Allows customers to delay payments for a set period, after which interest may apply.

• Personal Loans via Brokers: Retailers partner with finance brokers who source loans from panels of lenders. Customers borrow directly from the lender, while the broker and retailer facilitate the process.

Each approach has distinct pros and cons, as well as compliance requirements. The choice depends on your business model, customer preferences, and willingness to absorb costs.

Cost, Risks, and Impact on Your Business

The costs and risks associated with offering monthly payment plans include:

• Subsidising Interest: With interest-free credit, retailers often pay the lender a subsidy (typically 5–10% of the sale price).

• Customer Default: If a customer misses payments, the finance provider bears the risk, but reputational impact can affect the retailer.

• Increased Sales and Conversion: Payment plans can boost sales volume and average transaction values.

• Operational Complexity: More paperwork, training, and ongoing compliance monitoring are necessary.

• Regulatory Scrutiny: Failing to follow FCA rules can result in fines or loss of permissions.

A well-managed finance offering can unlock growth but requires careful consideration of the associated costs and obligations.

Eligibility, Requirements, and Compliance Conditions

To offer finance, UK retailers must meet certain conditions:

• FCA Authorisation: You must be authorised or an appointed representative of a regulated broker.

• Staff Training: All staff involved should understand finance products and compliance requirements.

• Clear Advertising: All promotional materials must display representative APRs and key terms.

• Fair Customer Assessment: Lenders will perform credit and affordability checks on applicants.

The process also involves strict data handling and ongoing reporting to the FCA. Non-compliance can have serious consequences.

Step-by-Step: How to Offer Hot Tub Finance

1. Partner with a regulated finance broker or lender

2. Obtain necessary FCA authorisation or permissions

3. Train staff in compliance and finance procedures

4. Integrate finance options into sales journey

5. Display clear finance information and APRs in-store/online

6. Assist customers with finance applications

7. Submit applications to the broker or lender

8. Complete sales once finance is approved

Pros and Cons at a Glance

Pros:

• Increases customer affordability and access

• Boosts sales and average transaction values

• Enhances competitiveness in the market

Cons:

• Retailers may subsidise interest (cost impact)

• Requires strict compliance with FCA rules

• Increased operational complexity and staff training needs

Balancing these factors is key to a successful finance offering.

Things to Watch Out For Before You Decide

• Regulatory Compliance: Even minor breaches can lead to severe penalties. Ensure all processes and messaging are FCA-compliant.

• Costs vs. Benefits: Factor in the cost of subsidising interest, any setup fees, and training against potential uplift in sales.

• Customer Experience: Make the finance journey clear, fair, and transparent. Mis-selling or unclear terms can result in complaints and reputational damage.

• Broker Reputation: Choose a broker with a robust panel of lenders, transparent processes, and strong compliance support.

A careful approach protects both your business and your customers.

Alternatives to In-Store Finance

If direct retail finance isn’t feasible or desirable, consider these alternatives:

• External Finance Brokers: Refer customers to a broker, such as Kandoo, who can source suitable personal loans. This reduces your compliance burden.

• Manufacturer Financing: Some hot tub brands offer their own finance deals—partnering with them can offload some risk.

• Leasing Options: For commercial clients, leasing may offer an affordable route to access premium hot tubs.

• Traditional Credit Cards: Customers may use their own credit facilities, though this lacks the tailored promotions of in-store finance.

Each alternative has its own implications for customer experience and business risk.

Frequently Asked Questions

1. Do I need FCA authorisation to offer finance?
Yes, unless you act solely as an introducer to a regulated broker. Most retailers need authorisation or must be an appointed representative.

2. Who is liable if the customer defaults?
The finance provider typically bears the credit risk, but your business may face reputational consequences if defaults are common.

3. How much does it cost to offer interest-free credit?
Subsidy fees range from 5–10% of the purchase price, paid to the lender.

4. Can monthly payment plans increase my sales?
Yes. Many retailers report higher conversion rates and larger average orders when offering finance.

5. Are there restrictions on promoting finance offers?
Yes. All adverts must comply with FCA rules on clarity, accuracy, and representative examples.

6. What’s the difference between being an authorised firm and an appointed representative?
An authorised firm holds direct FCA permissions. An appointed representative operates under the oversight of an authorised principal (such as a broker).

Next Steps for Retailers

Start by researching brokers and lenders with solid reputations and comprehensive compliance support. Review your existing sales processes, and assess training needs for staff. Consult with a compliance expert to ensure all marketing and customer interactions are FCA-compliant. Finally, pilot your finance offering and refine it based on customer feedback and business results.

Disclaimer

This article offers general information and does not constitute legal or regulatory advice. For specific guidance on FCA authorisation or compliance, consult a qualified professional or regulatory expert before proceeding with any finance offering.