Attention Carmakers: We Need More Leasing Incentives!September 29, 2017
The auto industry is at a turning point. After several years of increasing new car sales, the market is starting to cool off. Sales are slowing, and some manufacturers are even cutting back on production and laying off workers to adjust to this new reality. Meanwhile, there are four million unsold new cars sitting on dealer lots.
Against this background of slowing sales, the prices of new cars have been rising sharply. The average transaction price of a new vehicle in August 2017 was $34,646. The average car-buying consumer, who has not seen much increase in his or her household income, is finding it more and more difficult to afford a new car, truck, or SUV. If you’d some proof of this, here’s a fun fact: the average age of a car in the US is currently 11.5 years old.
Car loan financing terms have been stretching to 72 months, 84 months, and even 96 months, so that the monthly loan payments will fit into buyers’ budgets. But the hazards of long-term loans can come back to bite you if you need to sell or trade before the loan is paid off. And if you do keep the vehicle until the end of the loan, you are out of warranty for many years, and risk unexpected and budget-busting mechanical repairs. This is a lose-lose situation!
So the manufacturers have a sales problem at the same time that consumers have an affordability problem. Is there a solution? There sure is, and it has everything to do with leasing!
Manufacturers: Move Those Unsold Vehicles With Better Lease Deals!
The manufacturers have two different problems that could be solved with better lease deals. First, they could move more of their unsold vehicles. By structuring these deals so that there is a low monthly payment PLUS a healthy rebate to cover all of the “due at signing” costs, they would effectively become “no money down” lease deals. New vehicles would be instantly affordable to a much larger group of potential buyers. The result: a huge boost in sales!
Second, the problem with those long-term car loans is that they keep buyers out of the market for six, seven or eight years. The carmakers have to wait a long time for these buyers to return for their next vehicle. On top of that, their very old vehicle will not be worth much on a trade, making it difficult for them to purchase the next one.
Better lease deals will guarantee the manufacturers that these customers will return in just a few years, ready to step into another lease. That means more new car sales sooner! Another benefit is that the car that is returned will be almost new and in good condition, and can be resold without any problems. Now the dealer has a great used car for sale!
Consumers Win With Better Lease Deals, Too!
When consumers lease instead of buy, they avoid all the hassles that often come from locking themselves into a long-term car loan. They know exactly what their costs will be. They will have a new car warranty for the entire term of the lease, so there is no out-of-warranty expense risk. And after a few years, when their lease is up, they can simply walk away. There’s none of the jeopardy attached to being “underwater” on a money-losing long-term loan. It’s a win-win!
It’s Time To Help The Market Work Better For Everyone!
Listen up, vehicle manufacturers, distributors, and leasing companies: leasing more SUVs, cars, and trucks is the easy way to keep the factories humming, maintain or even increase sales, get customers back into the showroom every few years, and end up with more good-quality, profitable used cars. The way to do this is to add more lease incentives so that there is no question that leasing is the easy, affordable, hassle-free, and overall better way to drive your next vehicle.
And one more thing: those four million vehicles on lots nationwide are not doing anyone any good just sitting there. Let’s get them moving with affordable lease deals, keep the economy on an upswing, and make everybody happy – it’s the American way!