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Guest opinion: Manufacturers lead the personal leasing charge – is it time for dealers to follow?

Mike Best Contract Hire and Leasing 2015

What do the latest Volvo V40, Seat Ibiza and Ford Focus Titanium campaigns have in common?

They’re all obviously promoting a new model of popular car, but take a closer look and what you’ll notice is that they all feature lease pricing.

Promoting personal lease pricing makes sense to manufacturers.

They can highlight appealing, low monthly costs without having to include a never-ending stream of T&Cs in their ads (as is required with credit financing models like PCP).

More than that, captive finance companies prefer lease deals to the likes of PCP as it allows them to retain the profit at the end of a short-term deal – rather than potentially giving it away to the customer.

Consumers, on the other hand, are opting for personal leasing in ever greater numbers due to the appeal of the low down payments and monthly costs.

It’s also an incredibly flexible and low commitment method of getting hold of a better car than an individual might be able to afford outright – perfect for today’s ‘direct debit generation’.

As Matt Freeman, of CAP Consulting, has stated, with consumers growing accustomed to renting and frequently upgrading items such as mobile phones, they are also becoming “a lot more open to short-term leasing for things like cars.”

leasing offers 2015

At risk of being left behind?

In the face of these changing manufacturer and customer preferences, a very real question emerges – could the car dealership be at risk of growing a little out of touch with wider market preferences when it comes to making sales?

After all, research has revealed that only 15% of dealerships provide monthly costs on their websites.

And our own research suggests that almost 90% still don’t actively offer any kind of personal leasing deals at all. At best, this could be limiting the potential customer base dealerships appeal to; at worst, it could be actively costing deals right now.

New research has found that an incredible 92% of consumers have researched and decided what financing model they want to use to fund their new car before they even enter a dealership showroom.

And as more of these consumers are enticed by attractive personal contract hire deals they find via manufacturers’ promotions, they are increasingly expecting to be offered the same leasing options when they hit the forecourt.

All too often, however, this won’t be the experience they face in practice.

Typically, a customer encouraged to learn more about a leasing offer through an advert will walk into the showroom (most commonly on a Saturday or Sunday), only to be told that leasing is dealt with by the business centre manager – who doesn’t work weekends – and offered an alternative deal, usually a nice PCP option.

Now you might question whether this is actually a big issue at all.

After all, PCP deals can also provide attractive numbers to prospective customers – sometimes coming close to matching that of lease pricing.

But the truth is that PCP can seem much more complicated to consumers (the mention of APRs can make someone interested in a rent-based deal turn and run) and usually involves a much higher down payment.

Taken together, it’s a completely different proposition to that which the interested party came into your dealership expecting to get.

Dealing with informed buyers

And what the consumer expects, they usually get. Consider that 92% figure again.

Now factor in the reality that over 50% of consumers arrive on the forecourt with no prior contact with a dealer.

The message is clear – today’s car buyers don’t come to your dealership to talk (or compare) financing options. Rather, they arrive having already done extensive research, knowing exactly what they want and, most importantly, with confidence that if you can’t offer the specific terms they’ve pre-selected, they’ll be able to walk out and get it elsewhere.

So with the UK automotive sector fast following the same trajectory that saw leasing jump from 11% to 24% of all new car sales in the US over the last five years, isn’t it time to make sure personal hire contract was firmly established in your dealership’s sales arsenal?

Author: Mike Best (pictured), head of sales, Contract Hire and Leasing

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  • - 07/08/2015 15:09

    Only banks benefit from the ownership myth. With a conditional sale agreement, you don't own the vehicle until you pay the final payment in any case, at which point you then have no choice but to become a motor trader. The myriad options of financing options need to be simplified. You buy or you borrow!