What Could Off-Leasing Boom Mean in 2014?

by Jon LeSage, remarketing editor at Automotive Digest

The off-lease wave is rising. What might that mean for new and used vehicle sales?

Off lease returns are growing in numbers as expected from the high volume of new vehicle leases written 2010 – and that off-lease trend will grow into next year.

Leasing turned things around for vehicle sales three years ago – fueled by low interest rates, rising residual values, and sweet deals from automakers with lower monthly payments.

Now, more off-lease customers are starting to return to the market. Here are some of the questions automakers and dealers are pondering:

  1. What does it mean for brand loyalty and customer retention? Off-lease customers tend to be good for retention, but the competitive landscape is getting intense with incentives and low-priced monthly payments being promoted. General Motors entered the race last month after being away for a long time.
  2. Automakers have been very careful about watching their numbers this time around – matching production and demand and being more cautious about incentives than they were years ago. Will that continue?
  3. What do you do to keep off-lease customers in the channel? Early buyouts can work, but the costs can shoot up as of-lease volume and competition rises.
  4. Auto lenders have been softening their underwriting standards this year as customers do a better job of making their payments and competition in the financial market ramps up. Leasing has been growing in this environment. What if lenders have gone too far?
  5. Are automakers, dealers, and lenders being realistic about residual values? Leasing price competition has been pushed by Toyota, Honda, and others. What if the residual forecasts and their low monthly payments lead to a financial crisis in the next year or two?

Sources:
Automotive News
Bloomberg

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