AM Online

Carmakers lean to leasing

Management consultant AT Kearney believes manufacturers will be leasing cars to customers not selling them within five years.

The company is adding its weight to a growing band of people who believe leasing could replace outright purchase after it carried out a six-month study into the automotive industry. The benefit of this approach, it says, is that dealers and carmakers capture 100% of service and repair revenue. It also removes residual values from the equation, but only if everyone adopts leasing.

“The only thing that is holding this back is the attitude towards the initial sale,” says Steve Young, AT Kearney vice-president. His project team included ex-Ford of Europe boss Martin Leach who, according to the Financial Times this week, will shortly be appointed head of Maserati.

“We've had meetings with several manufacturers who are thinking along the same lines – they believe it's something they should be doing,” adds Young. “It will happen, probably within five years.”

He believes dealers need to examine their own business models and accuses them of failing to develop long-lasting relationships with customers. “If they did a better job, then their position within the tug of war over who owns the customer would be strengthened. But the customer relationship is not sustained by either the dealer or the manufacturer much beyond the initial purchase, even for premium cars.”

AT Kearney's research centred on a new-style car company dubbed 'Indego'. It showed that bypassing the retail network to sell cars direct to customers via the internet could boost average return on sales from 6% to 22%. But Young believes this is unlikely to happen in reality. “There will always be a need for a traditional dealership,” he says. “That vision is for a niche company which sells 250,000 cars across Europe.”

BMW also believes leasing could replace outright purchase. Guenter Niedernhuber, group director of financial services, told AM last year: “Buying cars on finance and giving them back at the end of the contract protects residuals – it's the future.”

If you are not a registered user your comment will go to AM for approval before publishing. To avoid this requirement please register or login.

Login to comment


No comments have been made yet.