To Buy or to Lease…That is the Question

It’s an age-old question that can wreak havoc with the consumer’s buying decision process. Should I buy or lease my next vehicle? Often, firmly-held perceptions are based on outdated financial information – or simply the result of a bad experience. Is your team armed with the right information to guide the customer? Or will they walk away still pondering…to lease or to buy?

Leasing continues to gain considerable market share as manufacturers place greater emphasis on lease incentives. According to a recent report from Experian, leasing hit a record of 31.09 percent of U.S. new-vehicle volume in the third quarter of 2015. This represents a 6.6% year-over-year growth and the sixth time in the past seven quarters when lease penetration topped 25 percent. With this growing trend, we can expect more manufacturer lease incentives in 2016, meaning now is the time to ensure your sales team can not only close a sale, but also a lease.

While the consumer confidence index has risen over the past several quarters, customers are still cautious about large expenditures. The mantra of “getting more for your money” can apply to this question of lease-or-buy. However, the answer to that question is more complex. A good start is to get a better understanding of your customer’s needs. Let’s start with some basic questions:

What is your customer’s purchasing history?

  • In the past, have you purchased – or leased a vehicle?
  • If you purchased a vehicle, was there a specific reason why?
  • If this is your first vehicle, what is your family’s purchasing history?

Are they interested in purchasing a vehicle – because they always have? Or their parents always bought a car? Do they understand the basics of positional leasing versus financing? Even if they considered leasing a vehicle in the past, the leasing industry has changed significantly in the past few years and your customer may be unaware of the nuances in today’s lease contracts. Walk through some of these key points to arrive at the best answer.

What does your customer need?

  • How often do you trade in your vehicles?
  • About how many miles do you put on your car in a year?
  • When was the last time you paid off a vehicle and kept it for a while?
  • Do you want to always have a new car with the newest packages?
  • Do you want to have a warranty to cover unexpected expenses throughout your car ownership?
  • When was the last time you were happy with the amount offered for your vehicle at trade-in?

These questions enable your sales team to determine if leasing is a good fit for their customers and helps them position the benefits of leasing to customers who may be on the fence about leasing versus buying.

Calculate the value of leasing.

Once you have determined your customer’s car-buying history and assessed their car use habits and objectives, then your sales team can delve into educating the customer on the monetary aspects of leasing. While the value of leasing may seem standard to your sales team, customers with little knowledge of the automotive space will better appreciate it when all the options are laid out on the table in an understandable manner. Remind your sales team to use these top-selling points to potentially tip the scale on the lease-or-buy question.

  • They will only pay for what they use
  • Lease payments are often lower than traditional financing
  • They are protected from market risks that affect the rate of depreciation for their vehicle, such as rebates, bad press, or discontinued models
  • They often qualify for newer model cars with the latest safety and technology upgrades with leasing

One question often raised by the customer is the issue of depreciation as it relates to the lease-vs-buy quandary. Make sure your team covers these key points:

  • All vehicles depreciate as soon as they leave the lot – both leased and purchased
  • Leased vehicles depreciate based on what was purchased – the time and miles accumulated during the length of the lease
  • Purchased vehicles depreciate based on the total purchased price of the vehicle – regardless of time and miles lapsed

While the core question – to lease or to buy – will never go away, a well-trained sales team can acquire a customer for life simply through education. These basic tips provide the foundation for a well-honed sales team that achieves dealership goals in sales and lease volume.

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