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NADA offers tips for dealers to retain vehicle lease customers

November 17, 2010

Leasing can be a boon for dealers, and the single biggest benefit is customer retention. Lease customers keep returning to the dealership. They replace their vehicles sooner than buyers because leases generally have shorter trade cycles.

 

And, since the lease-end date is known in advance, the dealership can be proactive in helping customers complete their current leases and select new vehicles. 

Customer retention, new-vehicle department

 

The shorter lease trade cycles can help boost profits. Though sales might be more profitable on a per-transaction basis, the increased volume from leasing can more than offset the per-transaction difference. A vehicle sale, for example, may generate a $3,000 profit, whereas leasing the same vehicle may generate a $2,000 profit.  

On a per-transaction basis, you would prefer to sell it. Over time, though, your lease customer returns every two or three years, roughly twice as often as purchase customers. Generating a $2,000 profit twice in six years is more profitable than generating a $3,000 profit once.

 

Another way to boost profitability is to sell maintenance packages along with the lease. These packages can include basic services such as oil changes and tire rotation, and the package cost can be rolled into the lease agreement. Encouraging customers to return for regular maintenance boosts service productivity and ensures dealers will have access to more valuable, higher-quality vehicles at lease-end. 

Customer retention, used-vehicle department

 

With today’s more accurate leasing residuals and the rising average cost of used vehicles, selling off-lease vehicles can be profitable. Off-lease vehicles are useful in building used-vehicle inventory, complementing regular trade-ins and auction purchases. And, since the dealership serviced the vehicles, you can trust the care and condition.

 

Have a knowledgeable leasing person work with your used-vehicle manager to select off-lease vehicles for used-vehicle inventory. Used-vehicle managers and sales personnel should communicate regularly about customer demand for vehicles that may be coming off-lease.

 

If dealerships track when lease customers are to return their vehicles, salespeople (or your business development center) can be proactive in contacting customers with in-demand vehicles. They may be able to help those customers terminate existing leases early and lease new vehicles, and the dealership can sell the off-lease vehicles to the customers who requested them.

 

This article is excerpted from "A Dealer Guide to Leasing as a Finance Alternative," an NADA guide that can be ordered at www.nada.org/mecatalog or 800-252-NADA, ext. 2.

 

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