February 2012 - Feature
Return to Normalcy
The industry shifts its gaze to leasing as the segment realizes gains and prompts dealers to update their processes.
By Jennifer Washington
Captive finance companies did all they could last year to revitalize a key metal-moving financial tool, and recent announcements and comments made by finance executives indicate that their drive to get leasing back to normal levels isn’t over. But are dealership F&I and sales departments ready?
The first indication that leasing has yet to reach its final destination was Toyota Financial Services’ announcement in January that it will launch a new wear-and-tear lease product later this quarter. Short on details, Justin Leach, spokesperson for TFS, said the hope is that the product will help Toyota dealers increase their lease penetration.
Other captive finance companies have indicated that they also are looking to increase lease penetrations this year. But they also note that dealer re-education will be key, as not every part of the country experienced leasing’s resurgence last year.
“In my part of the country, leasing has been out of the dealership for a while, so, to some extent, the knowledge of how to set up a lease on the sales floor in the Southeast isn’t there,” Craig Hewitt, a TD Auto Finance executive, said at the magazine’s annual conference last September.
Dealer Re-Education
Robbie Kanoff spent four and a half years selling leasing software for DealerTrack before he joined Country Hills Motors in Kansas City, Kan. And when he was pounding the pavement for the software provider, he saw firsthand how many dealers had forgotten how to deliver a lease. Part of the problem, he says, is many of the industry’s in-dealership lease experts were lost during the downturn. He also believes dealers avoid the transaction type because leasing doesn’t lend itself to the sale of higher grossing F&I products.
“Before I got in the car business, people did leasing and [dealer staff] understood it. But those people aren’t in the car business anymore,” Kanoff says. “And when you’d look at the F&I pay plan, [lease deals] don’t necessarily behoove the F&I manager to get proactive because they’re not going to get that credit-life penetration or the reserve you would get on a two-point spread.”
Executives at Ally Financial, the former captive of General Motors, have taken note. Last year, the company launched Ally Buyer’s Choice, a finance product that works like a lease by giving vehicle owners the option to sell their car back to the company after 48 months at a predetermined price. The company also rolled out a comprehensive lease class to retrain 7,700 dealer partners last year on a product it believes is the perfect option for economy-weary consumers.
“We took [lease training] to the next level to show [our dealers] how to qualify customers the right way and show them the right time to bring leasing into the discussion,” says Kathy Ruble, Ally’s director of alliance sales, performance and development. “The other piece is to give them the ability to manage their portfolio and really learn how to work that portfolio to their advantage.”