Reduced inventories and the increased cost of new and used vehicles has caused dealers to extend financing terms to 72, 84 and even 96 months. This effectively takes a customer out of the market for five to seven years. Vehicles depreciate at a much faster rate than principle can be paid down on these extended terms, creating negative equity for the consumer. For consumers to trade early they must produce large down payments or if possible, roll this negative equity into another vehicle. The industry needs more short-term finance options so the current situation doesn’t negatively impact the future of auto sales.
Shortened Trade Cycles and Increased Customer Loyalty
Used leasing allows for lower payments on shorter terms
with guaranteed residual values. Most of the used leasing customers are in an equitable position six months to a year prior to lease end. This not only brings a customer back to the dealership sooner, but the dealer also has an opportunity to purchase their used vehicle.
Programs with a shortened trade cycle bring more vehicles back to the selling dealer. A lease end process directs customers to the originating dealer thus giving that dealer the first right to purchase the vehicle and assist their customer with their next vehicle.
More Financing Options to Meet Your Customer’s Individual Needs
Used vehicle leasing allows customers to finance greater amounts to compensate for the increased used car prices. Advances can be up to 120% of MSRP or “Clean Retail” book value. This allows dealers to get customers lower payments with less down payment and the guaranteed residual insulates the consumer from negative equity at lease end when vehicle prices normalize.
Used Vehicle Leasing is Not Just for Prime and Super Prime Customers Anymore
Dealerships recognize the need for a full spectrum lender. One with seven credit tiers that will buy down to a 550 FICO makes the best partner. A good program will offer a front-end advance of 100% of MSRP or “Clean Retail” book value for someone with a 550 FICO. With the higher advance, lower tier customers are not faced with the large down payments required by other lenders just to get an approval.
Why Does a Dealership Need to Look Beyond the OEMs and Captives?
Dealers need options. Not one to compete with OEM or captive programs with incentivized rates or residuals but rather to provide an alternative financing solution. The OEMs and captives do not provide a used car leasing solution anywhere near as comprehensive as what dealers need to serve their customer bases. Dealers need a used vehicle leasing platform for CPO vehicles from all manufacturers. The ability to lease vehicles from current back to five model years with up to 75,000 miles at inception is now a reality that has not been available in the past.
Dealers Want and Need Partners that Deliver Higher Profits
Customers and dealers win with a partner that offers front end advances up to 120% of MSRP or “Clean Retail” book value. This allows for larger profits and/or less down payment from the customer. Used vehicle leasing provides dealers with the ability to structure deals that are more profitable to the dealership and more comfortable to the customer. Everyone wins when customers have lower down payments while the dealership enjoys higher profits and increased customer loyalty. Customers are able to buy new vehicles without negative equity in two years rather than five or six and what dealer doesn’t like the sound of this?
