Channel | F&I

As Leasing Grows, So Does F&I Opportunity

By: Toni McQuilken

As Leasing Grows, So Does F&I Opportunity

In a report released this past summer, Experian Automotive noted that new vehicle leasing had risen by 12.5 percent this year to date – it hit a record high since the firm started keeping track of the statistic in 2006. According to the report, leasing now accounts for as much as 27.5 percent of new vehicle financing in the first quarter of 2013, up from 24.4 percent in the same quarter in 2012.

At the same time, the report noted that lease payments were down – at an average of $459, down from $462 in 2012. That comes with longer loan terms for lease deals – 65 months in the first quarter of this year.

For dealers and agents, these numbers represent an opportunity. While there have always been successful exceptions, the majority of dealerships tend to focus their F&I efforts on finance deals, with leasing customers getting little-to-no attention. But these numbers demonstrate that lease customers are a large and growing segment of the population, and contrary to popularly held beliefs, F&I products are as relevant to them as to the finance customer.

“Leasing has certainly grown and continues to grow every month,” said Brian Crisorio, vice president, United Development Systems (UDS). “Some stores are going from one a month to 12 or more; in some stores leasing is just huge. Sure there are a couple of makes or models not as focused on leasing, but it seems like across the board everyone is in the leasing game.”

What products should dealers be focused on? The consensus was that many F&I products have a place in a lease deal. John Vecchioni, national sales director, United Car Care, noted that any wear and tear product is a good fit for a lease, as is any interior/exterior protection plan, key replacement or tire and wheel. He also noted, surprisingly, that GAP is a potential lease product as well.

Tony Dupaquier, director of F&I training, American Financial and Automotive Services, also put GAP at the top of his list. “Not all leases have GAP,” he noted, “that’s one of the things everyone keeps forgetting. You have to pay attention and make sure the lease has GAP in it, and if not, sell GAP. Most leases do have GAP in them, it’s built into the lease, but you sporadically find leases that do not come with GAP, and the business managers don’t even know it. They have to make sure GAP is included, and if not, sell GAP.”

Wear and tear or appearance protection plans – both interior, with chemical protection, and exterior with dent and ding – and tire and wheel, were the top ancillary products all three agreed that F&I managers need to be presenting to every lease customer.

“Any appearance product is typically a good one for the lease customer,” noted Crisorio. “Protecting the exterior finish as well as the interior from rips, tears and burns keeps the vehicle looking great. Paintless dent repair does much of the same thing – if it’s turned in with dents and dings, they get a bill. Keys are getting more expensive every year, so key replacement is becoming more important – a damaged or missing key when you turn in the car will be expensive. And tire and wheel is also a big one.”

Vecchioni noted that he sees more products being sold into leases as a bundle, rather than individually. “Bundling saves time, and that savings allows you to capitalize on features and benefits of the products along with the impact it brings that particular customer. Wear and tear protection along with an appearance package go together. You can bundle almost any product, just keep in mind they have to have some similar advantages that make sense.”

“A case could be made that there’s an advantage to selling a multi product versus selling individual products,” said Crisorio. “A lot of it depends on the approach of the F&I manager – train on the process regardless of the deal. Focus on options, rather than individual products, and give them the best protection for that customer.”

Dupaquier noted that he teaches his F&I managers to always start off with the lease products in a bundle. “If customer doesn’t want a package for whatever reason, they’ll typically go back and pick up an individual item,” he said, “so start with all of them packaged together. The most successful F&I departments I’m seeing, they’ll put together a lease package that will have all of them.”

The exceptions to the bundling rule seem to be two: prepaid maintenance and key replacement. All three agreed that those are great lease products, but are easier to sell as stand-alone products. It is harder, they noted, to build value for maintenance or key replacement. Dupaquier noted that in many cases, customers argue that they’ve never lost a key, so they don’t see the value in key replacement, and he sees prepaid maintenance as more of a customer retention tool than anything else. The trick on that, at least, is to price it effectively.

“A lot of business managers go with scheduled maintenance as their number one hit,” Dupaquier noted. “The only cautionary piece is your price point on it – on a lease, the product price is divided by the term of the lease, unlike a traditional finance deal, which is divided by 72+ months in some cases. So scheduled maintenance that is $400-$500 changes the lease price by such an amount of money it turns people off. When a dealership tries to make too much money on it, the customer goes away, since they can go get the services done cheaper elsewhere. And on the lease, the likelihood is that the customer is coming back to that dealership anyway because of the lease, so you have built in customer retention. So dealers should put the focus on the ancillary products, for the items customers are responsible for.”

At the end of the day, selling products into a lease deal should be no different than selling them into a financed deal. Other than specific objections that might come up, the approach should be exactly the same.

“The training for handling a lease customer is similar to training for a traditional finance deal or cash deal,” said Crisorio. “Much of our training is process related, and doesn’t change if the product does. Only some of the word tracks might change to fit that customer. The approach is identical. The important part is to build value in the products you’re presenting.”

“I would explain the conditions of the lease,” Dupaquier noted, “as part of the way they start off conversation. Make sure the customer is aware of their requirements as far as vehicle condition is concerned – the same type of disclosure as how many miles the vehicle can have. Things like windshield has to be 100 percent; any door dings they’re responsible for; no mismatched tires –they have to make sure they have four of the same; any paint fading or interior staining they’re responsible for, etc. So educate them on that, then it’s easy to generate demand for the product. Don’t approach it any different; work it similar to a finance deal, with the same basic approach.”

Vecchioni summed it up with a few tips for agents to bring back to their dealers. “1. Present every product to your customers; wear and tear products, appearance products, key replacement, and tire and wheel protection are products that make sense. 2. Ensure every regulation is complied with, going over every lease agreement and the customer’s obligation to the lease – it helps set up product.”

At the end of the day, all the forecasts show leasing as increasing in the near future, with more customers seeing it as a solid financial alternative to financing, especially with so many people taking credit hits in the last few years. Agents should be stressing the importance of those lease customers to their dealers, as it is a trend that isn’t going away any time soon, and it’s a profit opportunity that shouldn’t be missed. “Agents should embrace leasing as additional opportunities that earn money,” said Crisorio. “They have to support the dealer, and support the trends in the industry. There is nothing an agent can do to stop it, so embrace it, support it, and be a true partner to your dealer and help them in any way you can.”

This article was written by:

- has written 845 posts on Agent Entrepreneur.

Toni McQuilken is the managing editor for AE Magazine and P&A Magazine. She has a decade of editorial experience in the trade publishing world, across several industries, including print and graphics, as well as hospitality and technology. To contact her, e-mail tmcquilken@mgigmedia.com.

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The views expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views of Agent Entrepreneur or any employee thereof.

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