Article of the iic group in the magazine AUTOHAUS – edition June 2015
When car salesmen try to explain the basic principles of leasing with a short formula, they often say “You only pay the loss of value of the operating life!” But the leasing rates, as the results of a complex financial instrument, are already higher from a mathematical point-of-view. Namely, the sum of loss in value and the interest rates for the purchase price of the car. However, used-car leasing has many advantages for commercial clients through possibilities of depreciation and less capital commitment.
Nevertheless, or precisely because of this, used-car leasing enjoys an increasing popularity in the private customer sector, by following the trend that clients prefer paying for usage over the ownership of capital good. Certainly, attractive private leasing programmes of the manufacturers, a professional marketing and especially the combination with other services, like maintenance contracts and insurances, contribute to the success of leasing. All in all, the acceptance in the private customer sector has significantly increased.
The automobile trade recognizes the chance and uses leasing as a strong instrument for the loyalty of the customers: Only within leasing, the dealer has a direct access to the customer in the process of reselling – from the vehicle return, over contract processing, up to the essential customer contact in the following offers.
The results of mystery shopping for young used cars, after a recent survey of the iic group, show however: that this is not the case. Quite the contrary: For retail customers, leasing a young used car is often more expensive than leasing a new car.
Why is that the case? Thomas Hegger, author of several AUTOHAUS articles and manager at the iic group, sees mainly two reasons:
- The manufacturers do not want to cannibalise their new car business. That is why there is a focus on the assistance of new car leasing with the collaboration of automotive banks. Normally, the corresponding programmes support three areas: The rate of interest, the purchase price with an additional margin or appropriate bonus and the residual value of the existing residual value programmes of the manufacturers.
- The banks and automotive banks verify the used car as leasing object and the used-car customer as lessee with a risk premium. This leads to a higher interest rate but most of all to a reduced residual value to the end of the leasing.
These two reasons make it difficult for used-car leasing to situate itself within attractive rates for potential customers. In case a manufacturer wants to expand their used-car leasing sector, inevitable difficulty arises from the fact that, by comparison to the classic sale bonuses, a support above-average is necessary to offer competitive leasing rates.
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