Lease Vs. Retail Finance: The Surprising Reasons Why Leasing is Better

If you're a car dealership, then you know that financing is a big part of your business. However, did you also know that leasing is a more profitable option for dealers???

In this blog post, we will discuss 4 reasons why leasing is better than financing for car dealerships. Keep reading to learn more!?

1. Recycle Your Inventory and Make More Money?

Would you rather sell one car over the next 10 years or sell three???

The answer is obvious: more is clearly better.??

Enter leasing.?

Due to leasing having shorter contracts in general than finance you can recycle more inventory in a faster amount of time.??

In addition to that, if someone returns a leased car — and let's just say it has 40,000 miles on it — that means you as the dealer can take that same car, wash it, wax it, put new tires on it, and sell that car again.??

(And you can even do this a third time depending on the actual usage of it).?

The key to successful recycling is to make sure your customers are happy with their lease so they come back and renew or enter a new one with you.??

This goes with our next point: increased retention rates.?

2. Increased Retention Rate?

While leases are often shorter than financing a car, you are not losing money by leasing your vehicles out. Did you get that? You are not losing money.?

The likelihood of getting your customer back is far greater when you get them to sign a lease within the 60-month range. In fact, your chance of getting them back starts to decline with the length of a retail purchase.?

Especially once a customer finds their $10,000 buried after four years, their trust in you begins to wane. If you look at the top brands in any industry, and definitely in auto, customer loyalty is what makes the next big sale.?

(This isn't even mentioning the fact that repairs for a leased vehicle can be done in-house, providing another avenue of income for the dealer).?

Leases are a fantastic way to keep customers happy and coming back, as well as increase your chances of upselling.?

3. Adds More Protection for the Customer?

By choosing to lease over finance you, as the auto dealer, can add more protection for that customer within that lease payment, and still be competitive in comparison to finance.??

This is because the lessee is only paying for the portion of the vehicle’s value that they will use up during their lease term. This could be seen as an advantage to the customer, and in turn, help you build a rapport and relationship with them.?

According to recent studies, 52% of car shoppers feel anxious or uncomfortable at dealerships. Millennials lead the pack in their dislike, with 56% saying they’d rather clean their homes than negotiate with a car dealer. Gen X-ers aren’t fans either, and faced with alternatives 24% say they’d rather have a root canal than get into car negotiation.??

With the costs you and your customer are saving from signing a lease, it’s a great selling point to say that you are looking out for their best interests and not just trying to make a quick buck.?

By providing more protections for your customers, you're also increasing the chances of them doing business with you again in the future.?

(Hint: also think about what you could do with that customer when it's time for them to trade in or return their leased vehicle).?

4. Leasing Enables You to Offer Lower Down Payments?

When you offer leasing options to your customers, you enable lower down payments. This helps your customers feel like they can afford the car they want without being bogged down by a large initial investment.?

Moreover, lease payments, in general, are lower than finance payments. As we mentioned before, when you lease, you’re not paying for the entire vehicle, but rather the value you use up for the time you’re driving it.?

This could be a significant selling point for customers who are looking for a more budget-friendly option.?

Furthermore, it will lead to an increase in sales for your dealership, as customers feel like they can finally get into the car they want without having to break the bank.?

Takeaway?

If you’re a dealership looking to increase your profits, leasing is the way to go.??

Here's what you should know by now:?

• You can offer lower down payments and still make a profit on the vehicle??
• With leases you are able to recycle more inventory in a faster amount of time?
• Leasing increases brand loyalty and retention rate (an area sorely lacking for the next generation of car buyers)?
• You can add more protection for the customer through a lease?

Just be sure to do your research and find the best lease options for your customers. Do what’s best for them, and they’ll surely be back for their next car.?

Do you have any questions about leasing? Contact any of our members at the Leasly or leave a comment below and we’ll be sure to answer them!?