If you’re a car dealer, then you know that leasing is becoming an increasingly popular option for consumers. In fact, leasing is growing at such a fast clip that many people are now even choosing to lease used cars instead of new cars.
It might seem counterintuitive that someone would want to lease a used car, but as the credit market has dried up in recent years more people have found it difficult to purchase a new car, thus making dealers land more deals in their leasing department.
There are plenty of more reasons why used car leasing is skyrocketing in popularity, but one thing’s for certain: By offering used car leases, you can benefit from this trend while helping your customers get into the car they need
In this blog post, let’s explore why used car leasing is quickly becoming the future
Dealers Can Offer Lower Monthly Payments
The Federal Trade Commission reports that leasing is now more popular among consumers than ever before — driving the average age of a leased vehicle down from 40 months (about 3 and a half years) in 2007 to just 30 months this year.
While this may be good news for consumers, it can be tough for dealerships to keep up with the demand. Therefore, first and foremost, dealers can leverage used car leases to attract more customers and get more deals signed.
By offering used car leases you can ensure your customer’s monthly payment will always be lower on a lease than it will be on a purchase or a long-term loan; moreover, you can lock them into a steady, anxiety-free interest rate for their entire term of the agreement.
Meanwhile, car lease payments are designed to cover the depreciation of a vehicle rather than the market value. That’s what keeps lease payments lower in general compared to monthly payments when buying a car.
For used cars then, with much of the depreciation already paid for, you’ll find even cheaper leases that will provide solid earning power while still covering the continuing depreciation of the vehicle.
Earn on Each Vehicle While Retaining Ownership
If you sell used cars, then each unit sold is one less for you to profit from in the future. We here at Leasly aim to solve this. Instead of losing from your inventory, we supply the car for your customer’s needs ensuring that you won’t have to sacrifice your supply. However, the entire process is still done through you, meaning, you’ll likely see a significant boost in retainership of your customers when they have to come back to trade at the end of their three-year lease.
Additionally, if your customer does want to buy the car at the end of their contract, they have the ability to do so. This means you can sell the vehicle outright to the lessee by asking for a final balloon payment. Some customers do this when they have become attached to the car or otherwise find it ideal and don’t want to give it up.
Leasing gives your customer options – and there is nothing a customer loves more than feeling like they have freedom in the buying process.
This “ownership” is beneficial in other ways, too, since it places upkeep or maintenance charges in the hands of your customer.
When a customer signs a lease, they also agree to maintain the vehicle at their own expense. If customers bring their cars back to the dealership for scheduled maintenance and repairs such as oil and filter changes, belt and hose checks, etc., then it provides yet another revenue stream for the dealership to manage.
By leasing a car that already has miles on the odometer, you can expect maintenance visits to occur sooner than you’d experience in a new car.
With Inventory Strained, Leasing Remains the Best Option
As we continue to wait for the global chip shortage and supply chain worries to end, customers are now instructed by publications like CNBC, The Wall St. Journal, or Financial Times to get used cars, not new.
This has led to more people realizing that leasing is not necessarily an inferior way to drive a car — especially when it comes time to purchase that vehicle at the end of the lease period. In all honesty, for dealer services trying to sell used cars, leasing hasn’t just become a feature, it has become the lynchpin of their business.
If your used-car lease program isn’t as good as the competition, you are risking a major opportunity cost. Moreover, as customers buy your used cars, instead of leasing them, your pool of available used cars shrinks, which means you’re going to have a harder time finding the right car at the right price for your customers.
According to the Visual Capitalist, there’s a common misconception that millennials are driven by emotional needs and are much more likely to rent based on pragmatic reasons:
- Test things before purchasing: 57%
- Need a temporary solution: 55%
- Need an item or a service for a short time frame: 52%
- Less expensive than buying: 43%
- More convenient than buying: 42%
This is the renting generation. Student loans, credit debt, and record-high inflation have ensured that for many years to come. Through leasing, you can match your customers’ needs and keep them in a sustainable cycle of car leasing. It’s a much more sustainable model of business for the dealership than continuously selling used car stock.
The existing customers come back, sign new lease agreements on new cars, take those away, while the dealership simply auctions or privately sells the older vehicles to cover the remaining costs. A used car that they’ve leased out, therefore, generates a lot of profit over time.
It’s a no-brainer.
So, if you’re a dealership looking for an edge on the competition, used car leasing is definitely something to consider.
It’s been shown to be more profitable for dealerships and it seems that consumer demand and awareness of leasing is only going to continue to grow in the years ahead. Why not sign up with Leasly today and see how much money you can start making?