I recently posted about Gearwrench’s new marketing campaign, and how they focus on how tool users can go in long-term debt with tool truck brands.
For as long as I can remember, I attributed the higher pricing of Snap-on and other tool truck brands’ tools and tool boxes to their quality, with a premium built in for the at-your-door sales and warranty services.
In the Gearwrench post, Mike S wrote:
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What [tool users] don’t realize is that there are big financing costs built to [tool truck brands] high prices. I’ll pay a fair prices for the tools but I don’t want to pay off someone else’s truck debt.
I had not considered this before, and it seems like a reasonable argument.
Most pro mechanics and techs are required to buy their own tools and tool boxes. Such lines of work typically involve high upfront equipment costs, and then regular purchases can add on top of that. This is where payment plans can spread the costs over time.
Judging from the many online discussions about tool truck debt over the years, payment plans seem extremely commonplace.
I haven’t seen any statistics or hard details about the matter, and sought to take a closer look.
In wanting to learn more about the tool truck brands’ financing, credit, and loans programs, I conducted a couple of Google searches, including for “Snap-on financing apr.”
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In Google’s Q&A section, there’s an entry about “does Snap-on charge interest?” which draws upon a Snap-on Franchise Operations Manual (PDF) on Revolving Accounts.
The document is for the Australia and New Zealand region, but I don’t think this changes the nature of the information.
Here’s an excerpt:
It is a goal for every Franchisee to develop and maintain large enough total RA balances so that regular collections provide sufficient cash flow to replenish tool inventories, pay expenses and provide a good regular weekly income. It is only by consistent RA development and collection efforts that a Franchisee can realise this objective.
Snap-on also says:
As the Franchisee will already have purchased the product from Snap-on, the Franchisee is essentially extending their own credit to the customer, so it is critically important that the franchisee collect the money owed to them.
It sounds like franchisees – the tool truck dealers – buy products from Snap-on and resell them to their clients.
This part isn’t very clear:
It is a goal for every Franchisee to develop and maintain large enough total RA balances
Why is that better than accepting payment in full?
So it’s a goal for franchisees to buy their own inventory and then sell it to customers through payment plans?
The document also says:
However, Snap-on recommends a repayment schedule of less than 10 weeks for most RA purchases.
Is that the typical payment period? 10 weeks doesn’t sound like long-term debt to me. The stories I hear convey that many auto mechanics and techs have a constant balance, where regular purchases can lead to overlapping balances and increases in either payment amount or duration.
There’s a part in the document that says:
If the customer thinks that repayments are always round numbers, it can make it difficult to increase weekly repayments when their balance increases.
This suggests that Snap-on is at least aware that purchases can stack and lead to higher balances that need to paid off.
This 60″ 10-drawer roller tool cabinet is priced at $13,905 on Snap-on’s website.
Are new auto mechanics and techs able to pay off just this tool box in 10 weeks?
Every so often we hear from franchisees and tool truck dealers. In a Reddit post titled “Snap On Franchise a lucrative business?” from around 2 years ago, the first commentor starts off by saying:
I just finished my first year as a tool dealer. Perhaps it’ll get easier / less stressful but I’ve never been more miserable. It’s not all that physically demanding, but it’s more about chasing money than it is selling stuff.
I have heard a mix of good and bad things over the years, and it seems that tool truck dealers’ experiences can be very different.
Snap-on’s franchise website says:
Out-of-pocket start-up expenses for a franchise when using Snap-on financing:
- Range from $45,088 – $67,928
- Includes $14,472 – $27,516 working capital
The estimated total investment range is from $217,505 – $481,554.
That they have different cost estimates for “out-of-pocket” and “total investment range” is cleared up further down the same page where Snap-on lists potential financing options available to franchisees.
Across the industry, buying on credit seems to be unavoidable, at least for new mechanics and techs based on the sheer volume of tools and equipment, but it also seems to be encouraged.
There are advantages of Snap-on and tool truck dealers’ at-your-shop sales and service.
I think that at the heart of things is the requirement for most mechanics and auto repair and maintenance pros to buy the bulk of their own tools and equipment. I’ve heard various explanations and justifications for this over the years.
Would long-term tool truck debt still be prevalent if mechanics and other such users didn’t have to buy their own tools?
MM
This may not have been obvious from reading Snap-On’s website, but there are basically two ways a customer could “finance” purchases through Snap-On. One method is to get formal financing or a credit card through Snap-On. This works like any other credit card, bank lease, or loan: it requires a credit check, there’s an application and a signed agreement discussing the terms, interest rate, etc. The other option is financing directly with the local driver. There is no application, no credit check, no application. The truck extends you as much credit as they feel comfortable doing based on how well they know you & your prior history with them, and you’re expected to make weekly cash payments. I’m sure Snap-On corporate encourages this because even if nobody is making any money off APR people are more likely to buy more if they can finance.
Scott K
“It is a goal for every Franchisee to develop and maintain large enough total RA balances”
My guess: having a consistent customer base always in a low level of debt means the franchisee has a consistent revenue stream rather than highs and lows. Having more customers owe smaller amounts probably reduces the risk compared to a few people with huge debts.
My oversimplified understanding of Snap-On is that they built a solid reputation for selling high quality tools with an excellent warranty in a convenient manner. The tool truck model seems to have lasted despite the increased easy access to quality tools (HD, Lowe’s, Amazon, etc). They’ve leveraged that reputation to continue selling high priced tools.
This is essentially a luxury brand and there will always be a market for more expensive options regardless of whether it makes sense to pay more. The idea that a mechanic can purchase everything they need in one fell swoop and have easy access to warranty replacements probably makes this attractive to someone who doesn’t want to shop around and wants the name brand on their box.
IronWood
That’s exactly how I read the “large enough” credit balance issue. It’s essentially like the software companies moving to subscriptions so they have a steady monthly income, instead of the periodic windfall when a new product drops.
Eric
Having to make that payment is a good way to keep the customers stepping into truck every week. Gives the salesman the opportunity to show off the latest and greatest tool that they just got in. And since they’re already on the truck why not just go ahead and get that other new tool they need, it’s only going to add an extra $5 a week to their payment. Once they no longer have that debt to hold over you it’s a lot easier to tell the salesman that you don’t need anything that week and avoid getting in the truck.
And yeah I think 25 years ago the trucks made a lot more sense for people. You could usually buy the basics somewhere locally. But the more automotive specific stuff could be hard to come by. You could spend an hour or more digging through catalogs looking for the thing you needed and hoping it was in one of the catalogs you had. Or you could just tell the tool truck that you needed it and it would show up in a week or two. Now you grab your phone do a search, buy it and maybe even have it in your hands all before the tool truck makes its next visit. And if they don’t have it you would probably be waiting at least another week for it.
Scott K
Hopefully this video goes through- just watched this and found it really interesting. This franchisee compares elements of his setup to grocery checkout lanes.
https://youtu.be/MlVHrKFgvwA
MM
Yeah, I think you hit the nail on the head.
My local Snap-On drivers all meet in the parking lot of an Autobody shop every Friday afternoon. This is where/when payments are due for informal financing on the truck accounts so everyone who owes them money and couldn’t pay up during the truck’s weekly visit goes there to settle up. They also have a few cases of beer which are freely shared around and everyone hangs out and BSes. So, you can imagine this is a great time to get people on the truck browsing all that shiny bling, and perhaps with the beer flowing they might make some purchases they wouldn’t normally make.
I also agree regarding tool availability. 25 years ago your options for buying tools, especially automotive specific, were a lot more limited. Nowadays you can shop for anything online and have it delivered in just a day or two. Also auto parts stores have gotten a lot better about being able to source parts or tools from their network of other shops–sometimes even same-day–so that’s another option for someone needing a specialty tool fast. Napa, Oreilly, etc, might be able to get you that brake spring adjuster or sensor socket later that afternoon.
Happy
Reading the posts my response would be I agree with you Scott.
I have bought a few boxes and a lot of tools from the Snap-on guy that takes care of my area.
I buy my tools from him for the most part.
The tools are available or he can have them next week.
They are 100% warranted .
If I wear a socket out it’s replaced.
The Snap-on guy is knowledgeable and has access to a lot of different tool suppliers.
Some Snap-on dealer take advantage of their customers.
I have seen this in my travels.
If I put a cheater pipe on my ratchet and break it this guy I deal with warranties it.
I’m a heavy equipment field mechanic for Caterpillar.
Being quick and efficient means having the correct tools
Bo
It took me 6 weeks to get a Rachet repaired because snap on guy couldn’t get the repair kit because Rachet was 15 years old that’s crazy I got some craftsman tools over 30 years old and never have a problem getting those under warranty
Hon Cho
With regard to starting as a Snap-On franchisee, a few years ago the US Small Business Administration (SBA) would not provide guarantees for loans to establish a Snap-On franchises The SBA determined that franchisees were so constrained by the Snap-On franchise agreement they were not independent businesses. I do not know if this is still the case but I did review the Snap-On franchise agreement about 10 years ago and it was highly restrictive.
Scottie
I clicked on that Reddit post about Snap-On financing Stuart……19% interest per month for 4 years on the entire loan.Wow.Talk about sharks.Snap-On Sharks.
Stuart
That looks to be very different from credit being extended by dealers to their customers.
Someone adding numbers together on scrap paper isn’t reliable sourcing. When determining whether to take a stranger at their word, I look at their other comments and postings.
I’m not saying that’s the case here, but a lot of people make things up, especially these days. It’s hard to say what’s genuine, and what’s rage bait.
John
It’s a simple interest and nothing is front loaded either. As in the interest rate is not piled on at first. The rates are determined by states. In the state of NC the max interest that can be charged is 17.8% but if you devid that by 12 months that comes out to 1.5%. so say someone’s balance is 5k one month well that person will pay 1.5% on 5k. Now say the following month they made aarge payment and paid not down $3k well they will only be charged 1.5% interest on $3k. So every time there balance goes down so does there interest payment.
Albert
I never understood franchises. If someone wanted a Snap-On franchise, do they actually need to have $217,505 – $481,554 in cash?
ITCD
No, that’s what Snap-on financing is for. They want to see some money up front but will finance the rest. And since they’re kind enough to segment out their financing department on their financial filings, we can see just how profitable that financing is for them. The margins are super high, hundreds of millions in revenue in return for much less in expenses.
Farmer Ted
One thing about tool trucks, not everyone pays the same price and price is negotiable. Lots of rebate and incentives for preferred customers. Also not every Snap On customer pays the same interest rate.
Happy
Yes I agree Farmer Ted.
If a mechanic is responsible and builds a good relationship with the dealer it is valuable.
Eric
I got a KRL1023 ($12,500 retail at the time) for $6700 financed through Snap On for 0%for the first 12 months 19% thereafter. I paid it off within 12.
TonyT
That sounds like typical BNPL (buy now pay later) financing, including PayPal and Harbor Freight.
Note that for many (most?) BNPLs, if you don’t pay off within the specified zero interest time, you also now also owe accrued interest.
Mikyle
Matco, snap on, and cornwell all offer financing a line of credit as well. Not just a revolving truck balance with the franchisee, the interest rate also depends on your credit. Mine for example is 8.99% with snap on credit. But ive heard of people having as high as 20%
Eric
RA is the revolving account, a loan if you will, from the driver no interest is paid on this. This is separate from the Snap on credit for tool boxes, which requires a credit check and an application. This is carried by Snap On.
John
I actually have a Snap-On credit card. Got it in the early 80’s when I was just starting out. Today , the new Snap-On guy has never seen or heard of one.
Dave P
Many companies make far more money financing their products than they do from the outright selling/manufacturing of the product; there’s nothing new there.
But Snap-On has perfected a fantastic double-dip scam: add the financing cost into the list price, and then charge for financing again on top of that.
The businessman in me admires their entirely legal scam: as PT Barnum said, there’s a sucker born every minute and no one forces anyone to walk into that Snap On truck.
It’s easy pickin’s. Good for Snap On. Make money however is easiest and most profitable. And that ain’t making tools and selling them outright for a reasonable profit. Not at all…..indenturing people is much preferred to that,.
Greg
Its great Snap On has a business model works for many reasons, we need an innovative USA company that keeps producing better products and not diluting their product with large amounts of Taiwanese and Chinese products like Mac and Matco does. If there’s ever a hot conflict with China and Taiwan it’s important we have USA made hand tools for the military and aerospace industries.
Snap On keeps making more products here when most others are doing the opposite, like their ratcheting wrench line and they have really good pliers and keep pushing new designs. There is some hype in the Snap On brand name like Harley Davidson , John Deere but their hand tools live up to the hype and I have seen many times where a 80 year old ratchet will be repaired for free and that is pretty amazing. It cost a lot to produce hand tools in America so I am glad someone is making it work , well made hand tools never go bad and hold their value so if you are going to buy quality it might as well be in hand tools.
Kentucky fan
There are a lot of American made options that are fantastic and a fraction of snap on pricing
Chris
They don’t offer the services that snap on does though.
Greg
I only know of 7 USA made full hand tool lines. SK is out of the picture now.
Snap On= Best options , best ratchets, best USA plier line, seems to keep making more USA lines not less (locking pliers, ratcheting wrenches) I have always had good luck with their wrenches and sockets. Best resale value and easy to find second hand in my area.
Williams= mix of USA and Taiwan and many of the same Snap On tools are sold under Willians for less money.
Mac= makes less and less USA tools now and their advertisements say (global components)
Proto=Ok but don’t really feel as good to me
more basic less refined and less options. Ratchets are bulky, Pliers not so good anymore.
Wright=Good wrenches good company but Snap On offers more options.
Matco=More of a rebranding business that manufacturer and still heavy with Taiwan tools.
Cornwell = Don’t seem to make as many options and I see a lot of Taiwan rebanding.
Martin =(Not a full line of hand tools)
Jonny
Seems like the franchisees don’t do so well either. We seem to get a new guy every couple of years. One guy went back to doing oil changes at a car dealership because it paid better. The guy we have now only shows up every now and then, even though we have 25 mechanics between the 3 shifts. Sure the stuff is good, but if the service isn’t there then it’s pointless. Especially at that price. There’s plenty of tools that are nearly, although not quite as good, but only 1/4 of the price. I can order them and have them in service before the snap-on truck even shows up. I’ve been trying to some broken snap-on screw extractors replaced for 6 months now.
Dave
I used to work at a dealership 13 years ago. Mac, Snap on, Matco and Cornwell trucks would all come around. I bought tools off the Cornwell truck because they were generally the least cost of the 4 but they still carried some name brand impacts (Ingersoll Rand) and I wouldn’t finance more than $500 at a time (usually the impacts/torque wrenches) so I’d pay it off fairly quickly. For a toolbox, I bought a Masterforce for $600 I think it was at the time and did me just fine.
But yes, there were guys with $40-60k box setups and there is no way they had the cheddar to pay that in full up front.
IMO the mechanic gets screwed having to buy their own tools compared to just about any other trade like a plumber, electrician, elevator mechanic, framer, etc. where the union will buy them.
Luckily there’s more options these days beyond tool trucks to buy power and hand tools for the mechanic and someone can buy them on credit cards, while not ideal it can be done.
fred
Across all our businesses – we bought all of the tools that our employees needed to do their work. If someone wanted something special – we consider it – but sometimes might decline to procure some items if we thought that they were unnecessary and overpriced – without the demonstrated benefit of improved productivity or enhanced safety. The tool truck guys would sometimes stop by our metal fabrication business to try to drum-up sales. If I was on-site, I’d shoo them away by explaining our policy. Our plumbing business was split into both union and non-union shops – but we had the same tool buying policy across the entire business. In our remodeling business some of the employees might buy something like a Martinez hammer for themselves – but otherwise we’d meet all of their needs.
My view of the tool truck guys was that they are providing a nice service that comes at a rather steep cost to their customers. Like the sales of cars and appliances, I suspect that there might be as much profit in selling the financing (and extended warranties) as there is in a sale of the actual product. My partners and I slept well at night knowing that our employees did not “owe their soul to the tool truck guys” (to paraphrase the old Tennesse Ernie Ford 16Tons song).
Another Bob
I’ve always seen a good mechanic as more an independent contractor or subcontractor to the dealership or shop if they don’t own the shop.
You get paid more because you bring more to the party: expensive specialty tools/equipment, certifications and a résumé/references.
The shop owner is incentivized to pay you well and treat your fairly because your toolbox has wheels and you can leave anytime you want.
Some dealerships/shops, I believe in an effort to retain employees at a lower hourly rate, provide tools and the expensive diagnostic equipment. At that point you’re only an employee that can be more easily replaced. Conversely you can start immediately with no personal investment with a few minor certifications and determine if this is a field you want to remain in before investing in your future and incurring any personal debt buying tools girthing your certifications and working at a higher paying shop or starting your own shop.
Lots of pluses and minuses both ways.
Eric
As a Union Millwright I was required to buy all my own tools up to 1-1/4”. Even precision tools I was required to supply my own. Worked steady for one contractor for 18 years.
Another Bob
I’ve seen 19% thrown out. I’m assuming that’s the APR on the snap on corporate credit card rate?
The average credit card interest rate is 27.89%, according to Forbes Advisor’s weekly credit card rates report. So the snap on credit card is pretty reasonable by comparison.
At the end of the day tool truck debt and credit card debt is a real thing. But is it snap on’s fault or the consumers fault because they lack financial discipline and/or understanding?
More dedicated education in high school/trade school on basic to advanced personal finances would go a long way in controlling this problem.
s
would more education really help though? regarding your post, i really think this is an expectation problem on your part, not necessarily a money-management problem. while proper money management is key to future financial stability, i’ve personally found far too many people tend to assume everyone makes infinite amounts of money, and are done in by reckless spending instead.
i’m personally perplexed how knowing/learning math any better could make the situation any better– if my account balance is $25 after paying for only the basic necessities like food, shelter, and transportation, that doesn’t make it possible to pay for a $200 tool until at least 4 paychecks from that time. but without that tool, i’m jobless.
but then a guy in a magic truck is offering to sell me that tool, to keep my job, for $300, split into equal weekly payments of $10…
a lot of the jobs discussed here are caught in the middle. it’s not like one can graduate high school, decide to spontaneously save $50,000, and then decide to become a mechanic.
personally, i switched jobs last year. i went from being an electrician, to a truck builder/mechanic.
i had a good start to the tools i needed given my diy attitude and garage antics, but given the dramatic shift in roles, i still needed a lot of tools. granted, having a job for 20 years, i had time to build up some savings, but $10,000+ in additional tools, plus carrying personal insurance for a few months, a few weeks in a lapse of paychecks, and a small pay cut to beginning anew, all drains that quite quickly…
i made do by leveraging the savings i had, as well as balancing 0% offers via the menards, home depot, and amazon credit cards. i also played the sales– i have the perpetual 11% menards sale in my area which more than helped. i also started with the cheapest off-brand tools first to meet the requirements, and am slowly replacing those tools with better iterations as needed, either to perform the task more efficiently, or upgrade to something more durable as the cheaper tools wear out.
in some ways, i’ve an opportunity to be smarter with my money–i live extremely frugally already, and i have a significant credit history that allowed me the benefit of additional leverage in the form of those 0% financing rates, as well as ample credit limits, something that most new mechanics don’t have the opportunity to apply for outside of those tool trucks.
for new mechanics, many are either getting out of high school with the cash in their pockets and zero credit history, or worse, they’re graduating a trade school with student loans, a negative net worth, and a tiny credit history. but in neither case, does better money management skills suddenly make $20k in tools appear without some sort of financing/payment schedule/well-off grandparent.
and in that situation, there’s very little one can do–either get a job and buy tools on credit to keep the job to pay for the tools to keep the job to stay alive, or skip the tools, lose the job, and start back at the very beginning.
Mark Kelly
Snap On APR varies according to your credit rating. They have special plans also for purchases paid off in 6 months.
As far as education goes, there is no alternative to purchasing tools for a professional technician. If you think that auto technician is a job that doesn’t require education and experience, you’re quite wrong. Stop level technician requires 10 years experience and training and in most cases pays 80-100K per year. I know dealership techs pulling down $130k.
Also, if anyone wonders, for all of the negative talk about Snap On , being over priced and no better than Gear Wrench or other mid level brands, this is absolutely untrue. As a 46 year technician, just retired, I can promise you there is a significant difference between Snap On and any other brand. MAC and Cornwell come close but not the same and they are about the same price as SO. The mid level brands will not hold up to constant daily use the way SO does. There’s a reason for the price. They’re just much better tools.
Good Tools
In many other countries there are other tool brands in pro daily use, the price difference is huge compared to the snap-on brand. I know what the companies / owners have bought.
John
I for 40 years relied on one of the trucks coming in weekly. If they didn’t have the revolving credit plans in place there would have been no way I could have be able to accumulate the over $80 k in tools that I have now. Im retired, 64 now and don’t use a 1/4 of the tools in my box but I would not have been able to do my job if these tool trucks didn’t have the financing.
And let’s not forget about the warranty. No matter where I worked , the Snap-On guy was there like clockwork every week, Mac and Allied and Matco were hit and miss. The Mac guy always had to order a warranty tool. This is probably why 95% of my tools are Snap-On.
Michael Bakker
I am a mechanic started 2 years ago my first month I worked out of my bosses tool box and my coworks till I could buy a box of my own from harbor freight (us general).I soon outgrew that buying meny tool brands between wiha, gear wrench, tekton and even some craftsman. After learning not all warranties are the same I stuck to the tools that where easily warrenteed. Then we started getting snapon in the shop I told the driver I am a cash customer and started buying small items here and there I only buy specialty stuff off the tool truck(things that when you need them you need them not to break and are backed 100%). I make $22 an hour own 2 full tool boxes 1 half full tool box and owe nothing in debt save your showy stuff for fun thing a real mechanic can make due with eny tools!
Pete
Our company charges a similar rate of interest , but recently some stats showed a major retailer had 71% of purchases made by card,. Reality is all retailers till now have to use third party finance to get quality products into the hands of those who can’t afford it. If a landscape gardener buys a new zero turn on finance he is making 2k a month and paying only 200$ to earn that etc Finance has a place and we will strive to continue to lower that cost as we become our own lending company in coming year .
eddie sky
Snap-on: the MaryK or Tupperware tools for mechanics!
Its a franchise. Its an independent franchisee, locked into a losing “pseudo pyramid” mobile store than can only “gain” on your ability to hustle dealerships. If a small shops fold, you lose. If dealerships merge or close, you may lose as consolidation of mechanics means less to sell to. And many newer autos that require special tools, might be through the manufacturer and not the franchisee.
With competition now from Harbor Freight, and more, a mechanic can start up cheaper, with only needing missing/incomplete sets from SnapOn, Mactools, Matco, K&N, and Cornwell. This Smallbiz site details the franchise part. https://smallbiztrends.com/2023/12/automotive-tool-franchises.html
Beaño
Let’s be honest with ourselves and own up to the fact that snap-on is important BECAUSE it is expensive. That means something to us. Buying the best-of-the-best is aspirational and a powerful symbol to other insiders, that you are a serious player.
To some, the greatest value a snap-on tool will ever have, is being seen in their hands, but over time, a good tool will reveal its superior functionality.
I’m proud of my snap-on sockets. I’m proud of my shiny little 1/4″ ratchet that feels so good in my hand and sounds exquisite. In using top-end tools for the first time, you are punching through pedestrian ignorance, into the lofty realms of the elites. And I’m not exaggerating. Everyone who wrenches should aspire to such a relationship of trust and confidence in their tools.
Someday I would like to afford to own and maintain classic cars. To that end, I’ll need a secure garage, good tools and lots of disposable income; otherwise the cars will languish and fall into disrepair. Likewise, a good mechanic should aspire to rise to the top of their craft by preparing, practicing and investing strategically. First invest in skills, then tools. Nobody likes a tool poser.
It SHOULD be a sacrifice to buy the best tools out there. Does it matter what the financing fuss is all about? You might dicker for a deal on a dodge caravan, but you will need to pay until it bloody well hurts to get your hands on a 62 ferarri GTO. And I wouldn’t want it any other way.
Stuart
You’re trolling, right?
Doug Peters
It’s a tough business running a tool truck route. I get we’re snap on gives you a line of credit to make payments on. One reason why people complain is either they’re bad managing money or they keep buying more and making smaller payments. Snap on makes mostly great tools that last and are worth the investment. You can buy lots of Snap on used online or at pawn shops to save some cash.