Why leasing can help dealers navigate the challenging economic conditions ahead

Due to low inventory and strong demand over the previous few years, retail automotive saw unprecedented profits. However, as inventory slowly increases, could there be some repercussions soon? Rusty West, President, and CEO of Market Scan, joins us today on Inside Automotive and claims leasing could be the silver lining.

According to West, he doesn’t think EVs will be the factor that shifts the needle in five years, but there is hope that leasing will be in great demand. After seeing the negative press EVs have received since they first hit the market, West observes that certain communities simply cannot accommodate the demand for additional charging infrastructure.

For instance, the California charging stations are causing the grid to shut down in some areas. When the power went out at West’s California house during Thanksgiving, West asks, “How do you charge your car if there’s no power?”

The transition from, ‘EVs are going to change the world’ to ‘never mind,’ has been insane to observe, West notes. “I wish more people would follow actual science rather than the latest narrative,” he says. “I think Toyota wrote the book on hybrids,” he continues. “They were the first to do it correctly with their wait-and-see strategy.”

Although interest rates are still rising, the complexity of transactions will increase due to the uncertainty of how inventory will move. “This year, we will see manufacturers and credit institutions engage extensively in analytics,” West adds. West believes that rather than just acquiring volume, manufacturers and financial institutions will acquire market share at the proper price.

According to West, he notes, “leasing offers huge advantages to lenders. Similar to manufacturing, leasing offers opportunities for more transactions than long-term loans because of its shorter durations. But there are risks involved with leasing. One of the most crucial factors that must be taken into consideration for each lease offering is residual value risk. For lenders that think outside the box, this opens up new opportunities. Off-lease car lease programs that are aggressive and correctly organized can significantly reduce this remaining risk.

For more information regarding what Market Scan is bringing to NADA, stop by booth 3685. 

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