Tag Archive | "vehicle leasing"

Lease Volume Reaches Record High in 2016, Edmunds Reports

SANTA MONICA, Calif. — Automotive lease volume reached an all-time high of 4.3 million vehicles in 2016, according to the latest Lease Market Report from Edmunds, account for 31% of new-vehicle sales in 2016. That’s up from 29% in 2015.

Over the past five years, lease volume has grown by 91%. And as the popularity of trucks and SUVs grows — SUV sales surpassed passenger car sales for the first time ever in 2016 — consumers are turning to leasing to help them afford these higher priced vehicles.

“Leasing has long been the gateway for car shoppers who are looking to get a nicer vehicle than they could if they financed,” said Jessica Caldwell, Edmunds executive director of industry analysis. “Because SUVs and trucks are holding their values so well right now, it makes them much more accessible for a much wider swath of the market, further fueling their popularity.”

The average lease payment in 2016 was $120 less than the average finance payment. For large SUVs, the average lease payment was $125 less, and for large pickup trucks the difference was $206, thanks, in large part, to high residual values. Lease terms have hovered at a fairly constant average of 36 months over the past five years, while the average finance term is continuing to creep upward — averaging 69 months in 2016 (compared to 64 months in 2011).

While millennials still only leased 12% of all vehicles leased in the United States in 2016, they opt to lease more proportionally than all other age groups. Nearly one-third of all millennials who purchased a new vehicle in 2016 chose to lease — up from 21% in 2011. Millennials also accounted for the highest share of lessees with a household income under $50,000, which, according to the vehicle information site, presents a significant opportunity for automakers looking to capture the hearts and wallets of these likely first-time car buyers.

“Leasing hits a sweet spot for millennials — they can enjoy the benefits of owning a new vehicle at a low price point with the latest features they crave,” Caldwell said. “If automakers make a positive first impression with this influential group, they have a great opportunity to build lasting relationships as brand loyalty rates are much higher among shoppers who lease vs. buy.”

Luxury brands still capture the most lessees, but brands that have a heavy truck and SUV lineup are starting to play catch up. Brands like RAM, GMC and Chevrolet, which historically had lease penetration rates hovering between five and twelve percent five years ago, have seen lease rates jump more than 100%.

“While we think overall lease penetration will start to level off to 30% in 2017, the shift from passenger cars to trucks and SUVs shows no signs of slowing down,” Caldwell said. “As long as gas prices remain low and residual values on trucks and SUVs stay high, that segment of the lease market is likely to continue to expand this year.”

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Dealer to Pay $12,500 Fine for Illegal Leasing Practices

HARRISBURG, Pa. — Credit Connection Auto Sales in central Pennsylvania has reached a $12,500 settlement with the state’s attorney general for allegedly leasing vehicles that needed a considerable amount of repair work and using lease agreements that did not comply with federal law.

The business offers vehicles on a lease-to-own basis at its locations in Harrisburg, York and Carlisle. The Carlisle location also operates a motor vehicle repair shop.

The settlement, filed in the form of an assurance of voluntary compliance, requires the company to pay a $12,500 civil penalty for alleged violations of the Consumer Protection Law, the Pennsylvania Auto Regulations, the Truth in Lending Act and the Federal Trade Commission’s Used Car Rule. Additionally, under the terms of the settlement, the company must begin using lease agreements that comply with federal law within 90 days and comply in the future with the Consumer Protection Law and the Auto Regulations.

The Office of Attorney General’s Bureau of Consumer Protection received several consumer complaints about the company, which prompted an investigation. Those complaints claimed that the vehicles offered for lease by Credit Connection Auto Sales were represented to be in good working condition, but were later found to have mechanical problems that required repair work. And those repairs, consumers said, were often not performed well. Consumers also said the sales presentations at the dealerships were not always consistent and referenced misleading information.

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LEAP Financial Scores High in Customer Satisfaction

SAN DIEGO — LEAP Financial, a vehicle leasing company that serves consumers who have difficulty obtaining credit, scored high in a customer satisfaction survey it recently conducted.

LEAP asked customers to rate their overall satisfaction with LEAP using a scale of 1 to 5, with 1 being “Not Satisfied” and 5 being “Very Satisfied.” Eighty percent of customers responded with high and very high rankings. LEAP also received favorable ratings on other satisfaction measures, including 80 percent of respondents noting that they would recommend LEAP to a friend, according to F&I and Showroom magazine.

Customers were asked why they chose LEAP. By a margin of two to one, the most frequent response was that LEAP understood their situation and was easy to work with. When customers were asked to compare LEAP Financial with their prior lenders, the two most frequent responses were that LEAP understood their situation and was responsive to their needs.

“We are particularly pleased with the feedback we received in our recent customer satisfaction survey,” said Tim Condon, the company’s CEO. “We work hard to understand our customers’ situations and will dig into these survey results to understand how we can make their experience even better.”

LEAP was recently selected as a finalist for the San Diego Business Journals’ Inaugural Innovation Awards based on LEAP’s unique business model. This award was created to recognize organizations in the San Diego area that demonstrate how the innovative spirit drives economic value. Finalists from a variety of industries were selected and the winner will be announced at an awards reception in late June.

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Ally Introduces Financing Product With 48th Month Sell Option

Ally Financial Inc. debuted in five markets yesterday a new financing product that offers the benefits of leasing, but provides the advantages of owning a vehicle at a fixed rate and payment. The difference is that buyers who opt for the program can sell their vehicle back to Ally at the 48th month at a pre-determined price.

Called Ally Buyer’s Choice, the financing option was introduced more than a year ago to the Canadian Market in response to the Bank Act, which prevents banks there from offering leasing. Now Ally is bringing it to the U.S. market, introducing it yesterday at General Motors and Chrysler dealerships in California, Florida, Illinois, New York and Texas, according to F&I and Showroom magazine.

“As a bank, you can’t lease in Canada. So, what gave rise to it up there is we were looking for something that would allow us to have the benefits of leasing in a financing arrangement,” said Tim Russi, executive vice present for Ally’s North American Operations. “After we saw how the program performed up there, we thought there would be a reasonably-sized opportunity in the U.S. [market] to provide the product.”

As for the 48-month sell option, Russi said the predetermined value is calculated the same way Ally sets its lease residuals. He added that loan terms do not factor into the calculation, as two people who finance the same vehicle at different terms will get the same amount back if opt for the sell option. As for how the company landed on month 48 for the sell option, Russi said that’s the average life of the company’s financing arrangement.

The main thrust of the product is to eliminate consumer fears of making a large purchase in these still-unsettling economic times, Russi said. But the product also aims to reduce consumer buying cycles, drive floor traffic, and, maybe, help dealers replenish their used-vehicle inventory. He also noted another possible advantage to the program.

“We don’t do a lot of 84 [months], but we’d like to see 84 with this type of structure,” said Russi. “But if you’re a consumer who is signing up for 84 months’ worth of payment, you’d love to drop that term and have an idea of the value you can get out with.”

Russi added that dealers were trained on a new calculator the company developed to help them structure deals under the new program. He added that if the value of the vehicle is higher than the predetermined price at the 48th month, the owner can opt to sell the vehicle on his or her own or continue making payments.

“I think dealers see the value in it because it gives them another way to meet consumers’ needs and overcome some of their fears in making a large purchase,” Russi said. “For the consumer, there might be a lot of reasons why [he or she] may need to get out of the deal — it could be an employment- or a family-related [reason]. So, this just provides the consumer with certainly in that they can sell their vehicle to us at a set price if [he or she] needs to.”

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