Vehicle affordability continues to be the albatross weighing down vehicle sales in 2024. While a joint forecast from J.D. Power and GlobalData reflects new vehicle sales rising 1.4 percent year-over-year to 1.21 million units, the average listing price in February was projected at $47,142. This amount is down one percent from early 2023. Regardless of this slight decline, when MSRP is combined with perniciously high interest rates, financing a new vehicle is still out of reach for a large part of the buying public.
But there is a trend worth noting that offers a glimmer of hope to the buyer who needs an affordable new vehicle – leasing! The Experian State of the Automotive Finance Market Q4 2023 reflects that the percentage of borrowers who choose to lease is up significantly. Leasing has always been popular with prime and super prime consumers. However, the auto industry saw a jump in subprime and near-prime leases as well.
Dealers have long recognized the numerous benefits of leases, from making high-priced vehicles more affordable to generating repeat business. However, the struggle remains prevalent that most consumers don’t understand a lease. This lack of knowledge makes them more wary of this purchasing option.
So, ask yourself if your team knows how to position leasing vs financing. If you don’t know the answer, then these tips will help refresh your team until you register for EFG’s F&I training.
Everyone knows that all vehicles depreciate in value as soon as they are driven off the lot. However, few consumers make the connection that their vehicle depreciates at the same rate whether they lease or buy. The only difference lies in what they pay for.
Think about what most customers say is their single biggest expense in owning a vehicle. They either say their monthly payment or gas. The truth is that their single biggest expense may be the hidden cost of depreciation.
According to The Wall Street Journal, AAA estimated that depreciation cost drivers $4,538 in 2023 if they drove 15,000 miles, versus $3,656 in 2022.
Most customers don’t learn about this expense until it’s too late – at trade-in time, when dealerships offer them less than what they expected or needed. Offering customers a lease is a great way to manage the depreciation expense and make the trade-in process easy.
When positioning leasing, just as with purchasing, your sales team needs to understand their customers’ needs.
If they have a predictable lifestyle, drive a low average number of miles, properly maintain their car, and want to make trade-in easy, then leasing may be a good option. Top selling points for a lease include:
- Protection from market risks that affect the value of a vehicle, such as:
- Manufacturer rebates
- Bad press
- Discontinued model
- Lower monthly payments
- Shorter lease terms
- Drive a newer model with the latest technology and safety features
Advise your customers that when they buy, they commit to the entire cost of the vehicle – no matter how many miles they drive or how long they keep it.
While leasing is on the rise, there will always be people who prefer to buy. That’s why it’s important to ask the right qualifying questions before positioning a lease, such as:
- How often do you like to trade in your vehicles?
- When was the last time you paid off a vehicle and kept it for a while?
- How many miles do you drive per year?
- Do you trade your vehicles or sell them outright?
- When was the last time you were happy with the amount offered for your trade-in?
In the end, your team needs to help their customers decide what matters to them. The decision to lease or buy depends entirely on their lifestyle and what they feel comfortable with.
With almost 50 years of insight into the consumer mindset in the auto retail space, EFG Companies knows how to train your team to readily position the benefits of leasing. At EFG, we’re more than an F&I provider, we’re your business partner in the retail automotive industry. Contact us today to learn more about how our team can help you achieve your winning strategy.