With 1.8 million leases expiring between now and July, automakers and dealers have an opportunity to retain some customers.
As the auto industry enters uncharted sales waters courtesy of the current pandemic, finding ways to get potential buyers into new vehicles – or back into vehicles in the case of leasing – is more critical than ever.
New vehicle sales in March dropped in the mid-40% range, and analysts predict that number will be even worse in April. However, automakers and their lending arms are hustling to try to keep sales from falling too much with an increase in zero-percent financing deals and increased incentives.
However, leasing makes up 31% of new vehicle acquisitions these days, according to J.D. Power, and getting leasees to come back for another round will be critical. In fact, 1.8 million auto leases will mature between now and July.
(Q&A: J.D. Power’s Tyson Jominy offers a look at what’s ahead.)
“Retaining lease customers is crucial for dealer and lender profitability as they navigate a constricting market and economic downturn,” said Patrick Roosenberg, director of automotive finance intelligence at J.D. Power.
“Communication through customer-preferred channels is paramount as dealerships temporarily close and lease customers navigate an unprecedented event, uncertain of their available options to defer payments, extend or terminate their leases.
The company just completed its U.S. End of Lease Satisfaction study, which revealed that there are really four key factors in that play a role in getting someone who has leased a vehicle to do it again at the end of that lease. They include:
- First-time lessees are less loyal to leasing than returning lessees
- Customer satisfaction is key to retention
- Moments of truth
- Buyers are beginning consideration process sooner
- More customers are researching options
The new Power survey noted 53% of first-time lessees in the mass market segment indicate they leased another vehicle, with 58% of those returning to the same brand. However, 68% of returning lessees leased again.
For the highest-scoring lender in the mass market segment, 79% of first-time lessees leased again with the same brand. Understanding the different lease-end journeys is crucial to recapturing lease customers in both the luxury and mass market segments.
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Getting customers to lease from the same brand again essentially means that you’ve made them happy. The study noted that in both the mass market and luxury segment happy customers are returning customers. Also, the scores noted that the difference between a happy customer and a displeased one is a pretty thin margin. In the case of the Power study, on a 1,000-point scale, the difference between keeping and losing a lease is less than 80 points.
Seemingly the key to making them happy center on their experiences with the brand at key points during the lease. In the mass market segment, the greatest differentiation of lease satisfaction among those that leased again are ease of inspection process; ease of scheduling vehicle return; ease of turning in vehicle; and ease of lease termination. In the luxury segment, the greatest differentiation of lease satisfaction among those that leased again are ease of lease termination; ease of turning in vehicle; and ease of obtaining details about lease end.
Automakers and dealers need to focus on the end of the lease sooner, the study revealed. Customers are thinking about what their next vehicle will be sooner than in previous years. In 2017, the study showed only 3% of customers began to think about their next vehicle more than 12 months before the end of their lease. In 2020, that percentage has risen to 14%.
“Understanding and executing on the next steps drawn out in the study are key to securing retention,” Roosenberg said.
(Automakers might seek federal incentive program to kick-start sales.)
Getting information about the end of their lease and what’s available to them next is important information and lease customers are looking on their own in increasing numbers for those details. Smart companies and sellers should make that easy to find on their websites, since that’s where much of that due diligence is conducted.