(here is an article I wrote for the redesigned Driving Sales site regarding the rise and fall of automotive leasing in the car business and the faltering economy’s role in the strength of leasing programs.)
To Say the Lease –
We know the faltering economy is one of the many factors that brought vehicle leasing to a standstill. Nowadays, you have to be artistic to put an educated shopper into a lease because the dramatically lagging financial market has made it disadvantageous for them.
In years past, it wasn’t the troubling economy that slowed leasing, but the public’s negative perception about the programs. Leasing remained a very profitable way to put customers into a vehicle and, if handled correctly, see them again in a few short years. Truth be told, if the lease was structured correctly, it was a smart way for many consumers to drive a vehicle as well. Having spent some time in the finance office myself, I can say there is a reason that management and finance staff preferred to lease their vehicles too. Dealers did not do themselves any favors, though, when they took advantage of those payment buyers and converted them into unnecessarily long term leases. These were just some additional factors that made major manufacturers turn away leasing programs completely along with the declining residual values the banks were heaping upon trades.
With the government’s financial support (read: taxpayers), however, it looks as if we may all be back in the leasing business. General Motors and its financing affiliate GMAC just announced that they will be
entering the leasing market once again – tentatively scheduled for August 1st – after exactly one year away from the program. Ah, the perks of a bailout that totals over 60 billion between GM and GMAC when combined with their subsidiaries.The Toyotas, Fords, and Hondas of the world had pulled back from emphasizing those programs, but never left the field entirely. With an emphasis on leases, this could very well be a deciding factor in the re-growth of our industry by causing an all-important uptick in vehicle resale values and quicker inventory turn.
In no way will leasing get back to the greatness of yesteryear. Though it has the ability to remain profitable for dealers, it will be some time before it is a “best buy” for consumers.
If we want this rebirth of leasing initiatives to catch hold, we will have to do properly train both our sales AND management staff to understand the inner-workings of a lease (because I promise you, many do not know) and we will have to dedicate some of our e-marketing efforts to creating a pro-lease environment. From including lease payments once again in a showroom customer’s options to possibly having a lease matrix on your website alongside your payment calculator, there are a myriad of ways for dealers to incorporate leasing information into conversations with their consumers.
Once again, though, to see this new attention given to leasing pay off, your staff must stay knowledgeable and well-trained on the benefits of the program, not just for your dealership, but for the customer.