Monthly payments have become a significant factor in customers’ financing decisions. But dealers should look beyond the monthly payment to offer customers the best lease deal.
The average new-vehicle lease payment in the first quarter of 2016 was $406, one dollar less than a year earlier, according to Experian Automotive. Leasing made up an all-time high of 31.1 percent of new-vehicle transactions --including cash deals -- in the quarter, compared with 26.7 percent a year earlier.
But dealers should “focus on the whole picture, rather than laser focus on the monthly payment,” said Scot Hall, CEO of Swapalease.
For example, a lease with a yearly limit of 10,000 miles will have a lower monthly payment than a lease with an annual maximum of 15,000 miles. But for someone who needs the extra mileage, the 15,000-mile lease would be best. “You can go with the lower monthly payment, but you’ll pay a mileage penalty,” which is typically 25 cents per mile, Hall said.
The most effective deal structure also depends on the leasing company’s policies, Hall said. Some leasing companies do not allow lease transfers, if necessary. So if there is a $400 per month lease option without transfer allowance and a $410 per month lease option with the allowance, the lease with a higher monthly payment may be the better option. “That means you can easily transfer midterm,” Hall said. “That can save you money down the road.”
To build customer loyalty, dealers and F&I managers should encourage customers to weigh factors besides the monthly payment when making their financing decisions. Sometimes flexibility should be the priority.