The Future of Leasing

Here is my response to Marcie Belle's post at AutoFinanceNews.net:

Marcie - If there’s one component of finance that’s gotten hammered hard in the past year, it’s leasing. Like lenders, lessors have tightened underwriting across the board. What makes things more difficult is the fact that so many lessors have curtailed their businesses or exited the market altogether.

In a nutshell: Fewer providers are offering leases, and of those that remain, qualification standards are tough.

Technically, it would seem that leasing would be a popular option these days, with car buyers seeking the lowest possible monthly payments. But because lessors have reined in residual value estimates, monthly payments are not that much cheaper than loan payments. Put simply: Leasing has lost its edge.

In its heyday, leasing commanded about a third of the financing market. These days, I wouldn’t be surprised if the ratio were closer to 10%.

Will leasing ever rebound? Sure, when the memory of residual value losses fades. For now, though, with financiers scrambling to survive the current new-vehicle-sales nosedive, leasing will remain elusive.

Jeff - The future of leasing is really about closed-end consumer leasing and it should be bright!

Everyone believes that today's lower residuals are such a negative. ALG and RVI have pulled way back and the typical reaction is that a consumer will never go for a lease when the payments are not artificially low. That is far from the case - IF the dealer knows how to sell a lease properly. And that's a very big "if" because not many do.

When residuals are high, a blind dog can sell a lease. But this short-term gain has proven to be a loser for everyone at lease end. Lenders lose at termination, dealers lose a now distrusting customer and the customer looks at his next car's higher lease payment and eschews the lease for a 72 or 84 month retail payment.

Where is the logic in that? And why is it that consumer leasing companies like D&M Leasing in DFW are still leasing 500+ cars per month?

The few leasing lenders that remain would be well served to re-educate their dealers on how a more realistic residual is GREAT for the consumer. Those that are not in the game today have a perfect opportunity to get back in, with realistic residual values and unprecedented opportunity.

Too often we forget that the real value of leasing occurs at end of term. Lenders are scared to death of lease returns but today’s ultra-conservative residuals mitigate that risk. Not entirely but we are certainly much better protected than years past.

And even with higher payments, the lessee has valuable options at termination. He can sell it for a profit, turn it in, re-lease it (if there are any lenders out there who understand the value of POL) or buy it out right. If he “owns” the car on a 72 month installment contract, he’s going to be driving the car much longer than most consumers would like or he’s going to take a real bath when he gets sick of it in 3-4 years.

Leasing has never been right for everyone but it is certainly a great option for those who do not drive the wheels off their cars.

The real question is, are there any lenders out there who still get it and are they willing to re-train the dealers who are missing the boat?

First Published Article

This was just posted in Automotive Remarketing Today Online: http://www.autoremarketing.com/ar/news/story.html?id=9613

Thank you Jenna Reed and everyone at Cherokee Publishing!

New Online Auto Marketplace Reaches Landmark

June 17, 2009

DALLAS — AutoBidsOnline.com, a recently launched new-car research and buying Web site, announced Wednesday that it hit a major traffic milestone earlier this month. 

Less than 40 days after its debut, the site celebrated its 1,000th unique visitor on June 4. 

"Even in the worst auto market in generations, there are still more than 10 million consumers who will buy a new car this year," pointed out Jeff Cook, co-founder and company president. Cook and his team are also the founders of CyberCalc, a proprietary leasing software application for franchised dealers, credit unions and independent lessors.

"We launched the site in the wake of the Chrysler and GM bankruptcies, yet still managed to beat our wildest expectations," he continued. "Our research indicates consumers remain interested in buying new cars but have grown wary of the traditional dealer sell." 

Basically, parent company DJ Automotive Information Services — which developed CyberCalc — has started a new online auto sales community. It is composed of AutoBidsOnline.com — which allows consumers to access pricing, rating and reviews — and BuyerBidsOline.com, a site where dealers receive online leads. 

And in less than two months since introducing AutoBidsOnline.com, Cook said he has already received positive responses from dealers and leasing companies. 

"Dealers are literally inundated with unqualified leads from other online lead generation sources. The other sites encourage consumers to request a ‘free' dealer quote," Cook commented. "They then sell the consumer's contact information to a number of dealers who compete with each other just to get the customer on the lot. 

"Even the best Internet departments close fewer than one in 10 traditional Internet leads. Most do not approach one in 20," Cook shared. "Online tire-kickers, teenagers and otherwise mildly interested shoppers make up the bulk of the current generation of online leads. 

"AutoBidsOnline.com was designed to make the buying process more pleasant for the consumer while providing seriously interested buying leads to the dealer," he added. 

One leasing company, in particular, applauded AutoBidsOnline.com for its efficient services. 

"This is set to turn new car sales on its ear," stated Mike Hernandez, president of D&M Auto Leasing in Grand Prairie, Texas. "We sell and lease more than 6,000 cars a year and have been troubled by the poor quality and inefficiency associated with traditional online leads. 

"These guys have developed a way to bring buyers and sellers together with their cost-effective, efficient and easy-to-use Web sites," he concluded.

Follow AutoBidsOnline On FaceBook

I'm happy to report we are now a member of the FaceBook Community.

If you've been following our BLOG, you know AutoBidsOnline is our latest creation and is set to revolutionize the way people buy their next new car.

Heretofore, if you were in the market for a new car, you could research prices, options, rebates and comparisons on sites like Edmunds.com, KBB.com and Cars.com.

But each of those sites is designed to get you to request a "Free" quote. To do this, they capture your personal contact information and then sell it to a number of dealers in your geographic area. In the end, it is hardly “free”.

If you are one of the ones who have already done this, you know your email inbox is quickly flooded with automated responses and solicitations to get you on to the lot. And even if you selected "email" as your preferred method of contact, dealers still call anyway. They cannot be sure their email made it through your SPAM filter. Trust me, this all becomes annoying very quickly.

Take it a step further and you will learn dealers almost never give you an actual quote. And in the rare case you do find a dealer who will, you can bet it is not their best offer.

After years of research, we designed AutoBidsOnline to overcome all of this. We keep your data completely private and allow you to set your own price. We then send dealers the vehicle you are looking for, with all of the colors and options you’ve selected. The dealers are incented to respond quickly and aggressively because they have to compete to win your bid.

Why? Quite simply because the first dealer to accept your price is the only one who will get your lead. And per our license agreement, they must have the exact vehicle in stock or have previously arranged for a dealer trade. You’ve now got your purchase price set without any haggling and without setting foot on a single dealer’s lot.

We are truly excited about the launch of AutoBids. In fact, June 12th marked the first month of the program’s release and we’ve already had 944 unique visitors in our first 30 days.

If you’re in the market for your next new car, we’d love for you to try us out. If you are not, please keep us in mind for your next purchase experience and be sure to tell your friends. We’ll save you a lot of money and make your next car buying experience an absolute breeze!

Many thanks,

Jeff Cook
President
AutoBidsOnline.com