The concept of leasing has been around since at least 2000 BC. New vehicle leasing has been around almost as long as the automobile itself. All manufacturers and many private banks offer attractive lease options to buyers hoping to get into a new vehicle with a lower payment and less depreciation risk. This seems to work very well for new vehicles with zero miles, but what about used vehicles?
Within the world of auto sales, the strategy of leasing used vehicles is gaining traction and popularity. This strategy is growing because of a growing need to remarket off-lease vehicles, which are quickly approaching 4 million per year. Simply put, dealers need more options for buyers to get them in the seat of a used vehicle.
Used vehicle leasing only makes sense. When you lease you are basically paying for the portion of the vehicle that you use. So, if it works for new vehicles, why wouldn’t it work for used vehicles as well? Granted, there are more risks for your dealership and the bank, but they can be mitigated by adhering to strict criteria determining which used vehicles are eligible for lease.
WardsAuto.com recently ran an article about the Van Horn Group in Plymouth, WI, who has fully embraced the concept of used vehicle leasing. Their program focuses on B and C tier credit and offers leases on vehicles from current model-year on down to 3 years old, with mileage under 50,000. Financing is provided by Wisconsin Consumer Credit, which is the leasing arm of the Van Horn organization.
Consider the advantage a dealership can have by offering leases on used vehicles. If your competitor is offering the same vehicle without a lease option, you can have a significant advantage by offering that vehicle with a lease option. Buyers will appreciate the lower payment and the flexibility at lease termination.
Leasing of used vehicles also works to build a stronger relationship with your customers. With few dealerships taking advantage of this strategy, your lease client’s options will be limited if they wish to get back into another used lease at the time of lease termination. There is a much higher probability they will be back in your dealership when that time comes.
It is also worth considering what used vehicle leases will do for your inventory acquisition. Off-lease vehicles generally make excellent inventory, as lessees are afraid to abuse the vehicle and incur charges. The vehicles you get back from used leases will make an excellent used vehicle inventory down the line, the same way new vehicle lease returns have done for years.
With the rise in used vehicle inventory and the increase in popularity of used leases, you can expect that manufacturers will also get behind used leases. Don’t be surprised to see an increase in factory sponsored CPOV leases in the near future. It only makes sense that manufacturers will get behind this movement, as a surplus of used vehicles can only hurt new vehicle sales.
