In North America, the vehicle leasing market has witnessed some interesting patterns over the last several months. Although we’ve seen dips in credit approval rates, overall the market appears to be gaining strength. The growth in lease transfers is also having an impact. To find out more
Canadian auto dealer interviewed Scot Hall, Executive Vice-President of online vehicle lease marketplace Swapalease.com. Here’s what he had to say:
HE: We’ve been seeing some interesting trends in the leasing market over the last few months, can you talk a little about that?
SH: We did notice that at the start of summer, the lease credit approval rate appeared to drop, but more recently we’ve seen rates beginning to rise again. One factor for the change we think is that more people with subprime credit scores are looking to lease vehicles, plus the fact that in general, leasing has increased significantly since the recession of 2008-09.
HE: Can you tell us a little about the recent study findings? From what we understand, the lease takeover/transfer option presented huge savings over traditional financing and dealer lease options, correct?
Scot Hall
SH: Within our leasing centre at Swapalease, comparison analysis showed that a 36-month lease proved to be a cheaper option than 72-month financing (a difference of $2,774.39) and that savings from a lease transfer option were even greater ($5,404.39 compared to a 72-month financing loan, $2,630 compared to a traditional lease).
HE: Are millennial vehicle buyers likely to fuel an increase in vehicle leasing?
SH: We see a lot of comparisons between the mobile phone industry and the auto industry. Millennials understand that a mobile phone will be a monthly expense and that every 2-3 years they will want to have the latest and greatest technology. It’s the same in the car business and this “mentality” ties in with leasing strategy. A need for the latest in technology and style increases leasing rates and lease transfers as well as increasing the buying cycle rate.
HE: From what we understand, lease transfers are an even bigger deal in Canada than the U.S. at the moment. What do you think are some of the reasons for that?
SH: I think there are a number of factors. Vehicles tend to be more expensive in Canada which makes leasing a more attractive option. Secondly, the way the lease transfer process is handled, which is great for dealers. Because lease transfers can be handled at the dealer level, you’re able to have somebody coming in to take over a lease who is new to your store and who can become a potential sales or service customer. Additionally, the customer who is signing over the lease can also be a potential sale, perhaps at a later date. Also, you have a business manager within the store handling the paperwork, so there’s a real professional aspect to the process. In the U.S., most lease transfers tend to be conducted between individuals and the leasing company, not with the dealer.
HE: Can you tell us a little about pre-lease, leasing? Is that something we can expect to see more of?
SH: With the growing number of off-lease vehicles entering the marketplace, there is the potential for pre-leasing to grow. We’d like to think the banks might take a look at this as an alternative to your traditional used car or Certified Pre-Owned (CPO) financing programs. It’s something we’ve gotten away from since the recession but it can help manage off-lease inventory and also provide consumers with more choice. I would agree it’s something we could see more of in the near future.
For more information visit: swapalease.com
