As the cost of vehicles goes up, leasing is making a strong rebound in the market. OEM and dealer advertising are putting a strong focus on their lease programs. And with extra money in their pockets (tax breaks, increased salaries, etc.) consumers are looking to upgrade their vehicles. All this is good news for auto retailers.
The issue from a transparency viewpoint is the “low monthly payment and big down payment” advertising to lure consumers into the dealership. At this point let me acknowledge the reasonable payment and “0” down programs, but we can come back to them later.
Let’s look at a popular sedan that promotes a $199/mo for 36 months lease. Cash due at signing is $ 2439. So effectively the “real” monthly payment is $266.75 once you divide the $2439 by 36 mos. and add it to the advertised price. This particular manufacturers Internet ad did not even show the consumer how many miles per year was included in the lease.
Their disclaimer: Security deposit waived, taxes, title, and license fee extra. . . Not all buyers will qualify for the [OEM lease program]. Payment may vary, dealer determines price. Cash due at signing is after $3,750 Customer Cash. …Take new retail delivery from dealer stock by [date]. See dealer for qualifications and complete details. Vehicle shown may have optional equipment not included in payment.
I think the $266 price is still an awesome price for this vehicle but clearly, the OEM wants to “play the low payment game.”
Let’s look at another offering for this OEMs Sports Utility Vehicle that promotes a $289/mo for 36 months lease. Cash due at signing is $ 3458. So effectively the “real” monthly payment is $385.00 once you divide the $3458 by 36 mos. and add it to the advertised price. Again this manufacturers’ advertisement did not show the consumer how many miles per year was included in the lease.
Remember leasing is just renting a vehicle, keeping it in good condition and then giving it back to the “rental company” after the term is complete. It’s a great concept and a wonderful way for consumers to drive a new vehicle for a few years.
Now let’s look at the transaction from a different perspective.
Let’s say you’re out looking to rent a nice luxury apartment and have enough funds for the first month’s rent and a deposit. You see a beautiful apartment and the advertisement says $700 a month. WOW, you can afford that. Then the fine print says $6000 down payment required up front. Ouch. Have you ever seen an apartment rental ad worded like this? Of course NOT. People are RENTING an apartment, not making a down payment on a house.
Dealers should consider changing up their positioning and offer lease tiers to their customers. Start with the OEM advertised price but promote letting the customer pick their payment and/or down payment (cap cost reduction).
An example might look like this:
Our (enter a model name here) is available for lease and payments start at $199 a month but you have the option to choose another payment and eliminate any down payment for our 36-month lease program.
Our dealership lets you: Choose the payment that fits your budget, Choose the down payment or trade-in equity that works best for you, and Choose the annual mileage allowed. Call our lease specialist today.
Then provide the fine print/disclosures for the original offer to meet advertising and federal guidelines. The headline can be: Great Lease Programs, & You Can Pick the Payment!
While the OEM lease programs meet Federal disclosure guidelines they are “deceptive” to the consumer because of tight credit guidelines, unreasonable low annual mileage, and ridiculous down payments.
There are still some OEMs that offer zero down or sign and drive lease programs, so consumers with no real cash available will migrate to those vehicles if dealers aren’t able to offer something comparable. C’mon dealers get creative and make that happen while putting folks in new vehicles at “budget-friendly” monthly rates.
Mark Dubis is the President of Dealers Marketing Network and provides services to the smaller community and rural auto dealerships with cost-effective engagement and digital marketing solutions. He previously worked as a marketing executive for two major banks in the mid-west and owned a leasing company in South Florida for eight years. He can be reached at
(216-)712-6712 or at http://dealersmarketingnetwork.com