But BMW Financial will stick with the strategy it started roughly three years ago of offering loan incentives in addition to lease deals, Bugbee said at the Royal Media Group Auto Finance Summit in Las Vegas this month. Previously, BMW Financial put almost all of its marketing resources behind leasing.
Greg Skurkovich, director of consumer products in North America for Ally Financial Inc., said in the same conference session that leasing would continue to rebound overall for the industry.
However, Ally's lease penetration is well below the industry average, at about 10 percent of its originations in the second quarter of 2010. Ally CEO Michael Carpenter said in August that since Ally is now a bank and not a captive finance company, it wasn't interested in bearing the risk of adding expensive incentives to support General Motors' residual values unless GM paid for it.
Now, though, Ally says it intends to be competitive in both subvented and nonsubvented leasing -- that is, with or without factory incentives. In the Las Vegas session this month, Skurkovich said, “Now that we're an independent organization, we take that (residual) risk.”
Meanwhile, GM is eager to jump-start leasing. GM purchased AmeriCredit Corp. in part to create a leasing program, which starts in 2011. AmeriCredit became General Motors Financial Co. on Oct. 1.
Bugbee insisted that BMW Financial isn't trying to get out of leasing. Rather, he said, the company wants to achieve a better balance and give customers more choice. Still, the net effect is a smaller piece of the pie for leases.
In 2007, loans at BMW Financial accounted for only about 6 percent of BMW's U.S. new-vehicle volume, compared with 60 percent for leases, Bugbee said. Cash purchases and noncaptive financing accounted for the rest. So far this year, loans at BMW Financial account for 29 percent of retail volume, compared with 45 percent leasing, Bugbee said.
Even by luxury standards, that's still an above-average lease penetration, according to the Power Information Network. For a group of 13 luxury brands, the average lease penetration in the third quarter of 2010 was 24.4 percent, up from 17.7 percent in the year-ago quarter, according to PIN data. PIN is a unit of J.D. Power and Associates.
For U.S. retail volume overall, luxury and nonluxury, leases accounted for about 18.4 percent penetration in the third quarter of 2010, up significantly from the year-ago quarter's 10.3 percent. However, lease penetration in the third quarter of 2010 was the same as in the second quarter, and down from 19.3 percent in the first quarter of this year.
Moderation in all things
A couple of BMW dealership F&I managers said in separate interviews last week that it's OK with them if BMW Financial is less gung-ho for leasing, as long as it keeps offering both loan and lease deals.
“A balance is the only way to approach it,” said Josh Wheelock, finance director for BMW of Austin in Austin, Texas. BMW Financial's earlier slant toward leases wasn't appropriate for Texas, he said. Leasing isn't as popular in Texas as it is in the traditional luxury import markets on both coasts.
The emphasis on loan incentives “has been especially good for us,” he said. “We're not forced to make the customer take a path that maybe they're not that comfortable with.”
David Simoni, finance director for Field's BMW in Winter Park, Fla., said his dealership has seen lease penetration fall from around 70 or 80 percent a few years ago to about 60 to 65 percent leasing.
“Would I like it to be all lease? It is nice to know that in 36 months that customer will be back and ready to do something,” he said. “And tradition has shown here that we can get that person into another car.”
But some customers might not be comfortable with leasing, Simoni said. “My father is one of those people who say, ‘If you can't pay cash, you can't afford it.' I have to persuade him that financing the car at the dealership is actually a good deal. I think you have to support both” loans and leases, he said. “It's best if you don't try to force people into a certain mold.”