What can industry do to boost leases, residuals?

Interest rates, gasoline prices, unemployment and natural disasters are among the unpredictable forces that have an impact on the economy.

In turn, the economy has an impact on leasing.

But the industry has a few buttons it can push and levers it can pull to make leasing attractive and prop up residual values.

Here are a few:

  • Certified used-vehicle programs: "Certified pre-owned" programs feed on off-lease vehicles. They provide another profit center for dealers, introduce consumers to a brand and bolster residual values.

The industry sold 2.1 million certified pre-owned units in 2013 -- up 15 percent compared with 2012 -- exceeding the number of units that came off lease. In 2003, the industry sold 1.5 million certified pre-owned units, equal to less than half of the units that came off lease that year.

  • Subsidized, lower-cost leases: They can drive buyers from the used-car lot to the new-car showroom. "A manufacturer can make the demand for the used cars go down if they have extremely attractive offers on their new cars," says Eric Ibara, an analyst at Kelley Blue Book.
  • Vehicle inspections: Checking vehicles 60 to 75 days before lease maturity helps lessees know the condition of their vehicles so they can make informed decisions at lease end. Manufacturers also share that information with dealers to give them a heads-up about what vehicles are coming off lease, vehicle condition and mileage.

Dealers "can use that information to talk to the returning customer about their next vehicle" and to "have a conversation with someone who is shopping for a used vehicle," says Mary Hellen Owen, manager of market planning at Toyota Financial Services. The captive finance company implemented such a program in 2013.

  • Brand-exclusive online platforms: Volkswagen of America created one with DealerMatch, a sister company to Manheim, for VW dealers to buy and sell among themselves as many used vehicles as they want for a flat monthly fee. Auctions generally charge dealers per-vehicle fees to buy or sell a unit.

Scott Weitzman, general manager of used-vehicle operations at Volkswagen, says: "We want high residual values and want dealers' capacity to exploit the marketplace to be as strong as possible because we know that will lead to more new-car sales."

You can reach Arlena Sawyers at asawyers@crain.com

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