09 Sep Insight with Edmunds: What Dealers Need to Know About the Changing Leasing Landscape
This month we had the opportunity to sit down with Matt Jones, Senior Advisor at Edmunds, to get his insight into the changing landscape of the leasing market. We boiled down our discussion to 3 things you can do at your dealership to get ahead of the shift in the market so you can earn more business.
Let’s begin by looking back to 2016 which was a record year for the leasing market, with 4.3 million cars driving off the lot. Three years have since passed and those leases are now becoming due, but guess what? Prices have gone up an average of $80 a month on a leased sedan and your shopper will be in for a shock. To paint a picture, the Toyota Camry, which is the most popular used vehicle, had an average lease payment of $278 in 2016. Right now the average Camry SE lease payment is close to $350. While shoppers expect a slight increase in payment, a jump of almost 30% can be a tough pill to swallow.
Here are three things that you can do as a dealership to capitalize on this market
Educate your staff so that they can educate the shopper.
Many of you have newer salespeople continuously entering the dealership who may not be aware of the leasing situation. Even the seasoned veterans need to know what is happening in the market so that they can be of service to the client. The worst thing that can happen is both the shopper AND your salespeople are shocked when they run the numbers.
The best case scenario is that your staff is well trained and able to educate the shopper, serving as a trusted resource. These buyers are probably not aware of the changes in interest rates, higher sticker prices, lower residual values or tightening lending criteria. They may think they’re just getting taken advantage of by the dealership and not understand that this is an industry-wide problem.
Demonstrating your knowledge and concern for the shopper will prove to be an important selling point for why that shopper should come to your dealership as opposed to the one down the street. That brings us to number 2…
2. Let the shopper know they have options.
There are several options the customer has when coming off a lease and your team needs to be clear on what they are. One possibility is finding another type of lease vehicle, like an SUV. Unlike sedans, the prices of leases for SUVs have not gone up as drastically. By showing them a different model, the shopper may feel like they are getting an upgrade and will stay in a comfortable price point.
Another possibility is to get the shopper interested in your CPO inventory. Knowing that they have a certified vehicle can give them peace of mind with a payment that can be favorable to them. Yet, another option they have is to buy out the lease. Laying out what is available for the shopper and showing them the choices will yet again set your dealership apart. While most dealerships will tell the shopper that they have negative residual value on the lease and they’ll likely have to pay thousands of dollars out of pocket, yours will be showing them what they CAN do.
3. Get to the shopper before they start shopping.
Many OEMs are reaching out to the shopper halfway into the lease to plant the seed and try to get the shopper thinking of their next lease. We even see other OEMs calling on their competitor’s leases. As a dealership, you have this information in your database and should be calling the shopper BEFORE anyone else does.
We recommend calling at month 17 of the 36-month lease. This is a friendly call to ask the shopper how they like the car, ask if there is anything that they can do and offer them assistance to let them know what their options are before their lease is due so that they can make an informed decision when the time is right.
You’re not trying to sell them anything (yet), you only want to provide them with value so that when the time is right they come to you to find them their next vehicle.
Remember, every shopper provides you with many opportunities – they may be your next loyal service customer, or maybe they have other drivers in the family that will come to you. Once your team understands that there is a bigger picture you can maximize the client relationship.
Does your sales team know what to say to get your leasing shoppers in the door? Call us and we’ll show you how we can help give you the tools to convert more traffic to the showroom at 866-996-4665.
You can watch the full interview below: