In a recent Automotive News article, it was pointed out that leasing accounted for 31.4 percent of new-vehicle transactions in the second quarter this year, compared with 26.9 percent in the 2015 period, which is a new record high. For dealerships and F&I managers, it’s no longer a question of whether leasing is cutting into new-car sales. The simple fact is that more and more consumers are choosing to lease instead of purchase, which leaves F&I departments searching for new ways to introduce F&I products.
Increased leasing numbers bring change in the F&I office, but with this new record high, leasing is here to stay. Our best bet is to embrace leasing customers, and find products that will benefit them as much as the other products in our stables benefit the consumers who are financing. Because it all comes back to math; if lease penetrations are increasing and the profit per vehicle is increasing on lease vehicles, then there are no “losers” here, only a profit center the dealerships haven’t yet determined how to best address.
The real question isn’t whether leasing will continue to increase, or whether consumers who lease would benefit from the protections that F&I offers, but rather which protections will make the most sense to them. The vehicle service contract is a staple for many deals, but for leasing, it’s a different animal. Here are a few products to consider when the next lease customer walks through the door:
- Short-term service contracts/wraps. The number of leases isn’t the only thing increasing — consumers are also leasing their vehicles for longer terms, as well. Many manufacturer warranties cover new cars for 30,000 miles, but if a lease is good for 45,000 miles, that leaves a gap where the consumer will be responsible for any mechanical repairs on a car they don’t plan to keep long term. F&I products that wrap around the manufacturer warranty and cover those “gap miles” are a great product that every lease customer should be considering.
- Appearance protection. Many customers choose the leasing option because it is less hassle for them. But many don’t realize how fast the fees and charges can add up if they don’t return the car in great shape. Leases allow for a certain amount of “wear and tear” on a car, but that leaves a lot of leeway. In the F&I office, have a good selection of appearance protection products, like Interior/Exterior Repair, specifically designed for lease customers. These products address the most common issues consumers get dinged for at lease turn-in, and ensure they don’t find themselves with an unexpected bill when it comes time to trade in.
- Bundled Products: Road Hazard Tire/Wheel, Key Replacement, Cosmetic Wheel, Windshield, Dent & Ding, Interior/Exterior. During a typical three-year lease term, consumers will often find themselves with a flat tire that requires replacement, a chipped windshield that needs repair, a wheel that’s been scraped along a curb, interior damage or a lost key that needs to be replaced. And, of course, you can’t always protect your vehicle from that rogue shopping cart in the parking lot. Lease consumers find value in bundled F&I products because typically they are searching for a lower monthly payment, and bundled products often carry more bang for your buck. F&I bundles can help ensure lease consumers don’t find themselves in situations where they must pay several hundred dollars they weren’t expecting.
Just because the number of consumers choosing to lease instead of finance is rising doesn’t mean F&I should take a back seat. There are products with strong value proposition that still can drive profit for dealers, and these are the products that F&I managers can and should present to leasing customers. Leasing is just another type of deal, and it is on the rise, so don’t let it stop dealers or F&I managers from offering products designed to protect consumers from life’s unexpected moments.
This post was written by: Garret Lacour, CEO RoadVantage
Published: October 26, 2016
Original Source: http://roadvantage.com/2016/10/26/leasing-is-here-now-what/