Could the Internet ignite an auto lease boom?
Leasing could resolve two of the biggest obstacles to moving cars online: trade-ins and subprime finance. At least one manufacturer and two online buying services are eyeing special Internet leases as a way to boost online retailing.
Trade-ins are a major deal-killer in Internet transactions. They require a physical evaluation. And all too often customers are upside-down in their trade-in vehicles, owing more on the vehicles than they are worth.
But get customers hooked on an online lease program and there is no need to worry about a trade-in. The customer turns in one car and leases another. The off-lease vehicles can be retailed online, avoiding auction fees and reducing holding costs. The lessor knows when the leases will expire and can start promoting the cars on a Web site even before they come off lease.
Priceautooutlet.com, which is owned by BankAmerica Corp., retails off-lease vehicles below book value. Officials say the site has cut remarketing costs enough to pass savings to consumers.
Ford Motor Co. and General Motors are experimenting with similar sites. MSN CarPoint, an Internet buying service owned by Microsoft Corp. of Redmond, Wash., is considering a site that would help dealers retail off-lease vehicles. And Autobytel.com, the Irvine, Calif., buying service, views leasing as a way to spur future online business.
Once it refines its off-lease sales site, GM's e-commerce unit also may become aggressive in promoting leases online.
Many consumers also have shunned online credit applications because of concerns about security. Subprime customers are particularly sensitive. As a rule, high-risk customers often need personal attention from a special finance manager to get the deal done. As an impersonal medium, the Internet intimidates these customers.
But some lessors report that a 24-month lease can reduce the risk of default. Lease payments are lower than monthly payments for a comparable finance contract. Subprime customers are more likely to complete payments over a shorter term.
If so, the Internet could help trigger a lease boom.
Donna Harris can be reached at [email protected] or at (202) 662-7218.