The Tasca family, which owns Tasca Ford in East Providence, R.I., and Tasca Lincoln-Mercury in nearby Seekonk, Mass., helped pioneer short-term leasing nearly 20 years ago.
Robert Tasca III, the founder’s grandson, said the Internet provides plenty of space to inform consumers about vehicle leasing and to make the legally required disclosures that crowd a traditional print ad. Online marketing also helps cut through the clutter of newspaper ads, he said.
“More than 60 percent of the people who buy or lease a vehicle from us visit our Web site first,” he said. He is in charge of Internet marketing for the Tasca dealerships. “There is no question the Internet has an impact.”
The online strategy has helped keep the Tascas’ lease business healthy. Nationally, leasing accounts for 27 percent of the vehicle market (not counting fleet sales), down from a peak of 36 percent in 1997, according to CNW Marketing/Research, of Bandon, Ore.
Leasing accounts for half the new-vehicle volume at the Tasca dealerships — down from 70 percent in the mid-1980s, but still much higher than CNW’s national average.
High renewal rateThe Tascas’ lease renewal rate also is high. Ford Motor Credit Co.’s lease renewal rate is 44 percent, a spokesman said, but 62 percent of customers who lease a vehicle from the Tascas return to lease another when their leases expire.
In 1982, Robert Tasca Sr. cooked up his 24-month lease program with marketer and trainer Eustace Wolfington of Philadelphia. Tasca bought into Wolfington’s concept of promoting a shorter term, which puts customers in a new car more often.
The dealer, in turn, helped sell Ford Credit on the concept, and the Tasca dealerships participated in a pilot of the 24-month lease for Ford back in July 1982.
‘Way out in front’“The Tascas were way out in front of everyone else,” said Tim Gates, director of the Red Carpet Lease program for Ford Credit. “Tasca was the single largest innovator as it pertains to Ford getting focused on a two-year lease product. We worked closely with Tasca to refine our leasing strategy.”
With Ford’s short-term lease program, “Repeat business came at a much faster rate — basically the same customer back five times in 10 years, instead of twice in 10 years,” said Art Spinella, president of CNW Marketing/Research.
The Tasca family credits the 24-month lease with putting Tasca Lincoln-Mercury in the top 10 in Lincoln-Mercury volume nationwide in 1987 and 1988, according to the Automotive News Market Data Book.
But today, intense competition, lower incentives and growing legal scrutiny have created the need for a new approach to leasing.
In leasing, the customer in effect borrows the difference between the up-front cost and the residual value — the dollar amount that supposedly measures what the vehicle will be worth at the end of the lease term.
Lenders caught up in promoting leases in the 1990s set residuals too high and suffered losses when vehicles came off lease.
Lenders often set residuals artificially high as a way to lower monthly payments. Lenders set aside reserves to cover the expected loss at the end of the lease. But if the market value of off-lease vehicles is lower than expected, lenders take a bigger than expected loss on the residual. That factor hit the market for used sport-utilities last year.
Residual values peaked in 1997, according to Raj Sundaram, vice president of Automotive Lease Guide of Santa Barbara, Calif. Automotive Lease Guide is a commonly used benchmark for setting residual values. The company cut its predictions for residual values late last year. That helped force many lenders to cut residuals, even though it means higher monthly payments and fewer new leases.
Meanwhile, the Federal Trade Commission, as well as many state attorneys general, stepped up scrutiny of lease advertising in the mid-1990s, prompting the industry to tone down its advertising messages.
Promoting leases is not easy. Newspapers are cluttered with lease ads. A lease also is more difficult to understand than a finance contract and certainly less eye-catching than recent promotions of 0 percent interest.
How the Tascas copeThe changes in the retail lease market caused leasing to slip from a peak of 70 percent of Tasca deliveries in the mid-1980s to 50 percent of the business today. The Tascas now emphasize a three-year lease instead of a two-year term because the longer term lowers monthly payments. They also use the Internet to inform customers about leasing.
“There is a lot more room on the Web site than in a newspaper ad,” said Robert Tasca Jr., president of the Tasca operation. “And newspaper advertising is expensive.”
Tasca.com, the Tasca dealerships’ Web site, attracts 6,000 unique visitors per month. Information on leasing dominates the site. The site says: “The worst investment you can make is to borrow money to purchase a depreciating asset.”
Tasca.com includes five pages of frequently asked questions on loans and leases and seven pages promoting the Tasca “Pre-Trade” program, which is a short-term lease. Most of the specials advertised on the Web site also are leases.
Unlike a newspaper promotion, the details of special offers are not crammed into the fine print of a traditional print ad; they fill the screen. Visitors can see easily how many comparable vehicles are available; what equipment is included in the price; what rebates and financing alternatives are available; and what is the total up-front cost for a lease.
Like other dealerships that are serious about Internet leads, Tasca has a trained sales crew standing by to follow up inquiries. Tasca has one dedicated Internet coordinator and four additional salespeople who primarily handle Internet leads.
The online detail on leasing and its benefits makes leasing easier for the salespeople to close the deal. Salespeople can spend more time selling the benefits of the vehicle and less time explaining the concept of leasing because the site pre-sells the lease.
“The Web has been tremendous,” said Robert Tasca III. “It is an excellent medium. We believe in it.”