How can lenders best prepare themselves for the coming flood of lease returns set to enter the marketplace?
Start early and plan ahead.
That was the resounding advice given during the Center for Auto Finance Excellence webinar today, entitled “How to Play the Great Lease Return.”
The webinar is the third in a series of four in 2014 presented by the Center for Auto Finance Excellence and sponsored by Fiserv.
With a flood of vehicles coming to the end of their terms, lenders can take a few steps to better prepare themselves, according to today’s speakers: Senior Vice President and Editorial Director at Black Book Ricky Beggs, Vice President of Fiserv Automotive Solutions Craig Carrow, and National Manager of Remarketing at Toyota Financial Services Mike Reid.
“Everybody already knows that a lot of cars are coming back, and everyone has a good handle on their portfolios, but you can control how the drivers of your vehicles react when at the end of the lease,” Carrow said. “It’s not going to change the world, the cars are still going to come back, but it will give you the opportunity to move the needle in whatever direction you need.”
By starting early, Carrow said, and paying attention to lease maturities, you can determine your portfolio goals before the cars are returned.
“Are you trying to keep those customers in their cars, minimize loss or maximize gain for the entire portfolio?” Carrow asked. “Goals can be different for captive or lending institutions, so it is important to figure out what you want to accomplish with the portfolio before the cars come through.”
Beggs pointed out that leasing gives the advantage of knowing exactly what cars are coming back and when, so lenders can use predictive analytics and the tools that are out there to help support the market decisions they will soon have to make.
For example, Beggs said, by knowing that a concentration of returns will come back in a certain part of the country, dealers can then decide to weigh the cost of transportation to other markets, which can even out the supply.
No matter where the vehicles end up, though, Beggs suggests making sure they are in the best shape possible before going back into the market.
“Another thing to do is maybe look at doing some extra reconditioning,” Beggs said. “Getting that vehicle front-line ready, so when somebody sees that vehicle, it’s like ‘Yes I want to buy that, that caught my attention.’”
For Reid, who works with remarketing at Toyota Financial Services, leveling out supply and demand is always a factor, and one lenders should anticipate.
“It is no longer a reaction when cars come back to the marketplace, you really have to be proactive, you have to look at your programs, product planning,” Reid said. “Look at situations where you’re going to have a concentration of vehicles coming back in a certain area and have a plan for them when they return.”
Part of that plan, Reid said, is to leverage your auctions and work with them to take full advantage the internet. Toyota’s preparation, involves making sure that their cars are readily available at any given time, but there are only so many auctions and so many lanes, Reid pointed out, so they can only reach a portion of dealers.
Regardless of a dealer’s portfolio goals, however, Reid agreed with his fellow panelists and could not stress strongly enough the importance of starting early.
“Predictive analytics, where are you selling, having the right programs, communication with new car department, it’s really becoming vehicle lifecycle management instead of remarketing,” Reid said. “It is about getting the right information to our new car department so we make sure we have the right programs, so when those cars do come back in certain areas, they become quality used vehicles in their secondary life.”Like This Post