Vehicle leasing and football are a lot alike. Each has two key aspects. In football, it's offense and defense. In leasing, half the game is the lease and the other half is remarketing. If you aren't remarketing well, you're only playing half of the game — and probably losing money.
Joe Montana was a great NFL quarterbacks. He had an instinctive feel for the game, was deadly accurate and had the heart of a champion.
But can you imagine what would have happened if he had been required to play defensive tackle as well? He would have been pummeled on every defensive play — and he would've been so banged up that he would have been unable to perform as quarterback, creating a “lose-lose” situation.
Vehicle-leasing companies, banks and financial institutions have put themselves in the same “lose-lose” situation by forcing their employees to “play both sides of the ball.”
Not only do they attempt to aggressively market leasing programs, their core competency, but they also handle the back-end vehicle remarketing — a job for which most of them are not properly trained or prepared. However, a few easy steps can turn the game around.
Bankers are not born remarketers. They are trained in the science of evaluating credit risks and setting residual values: they play “offense.” Offense wins games, but defense wins championships. That's why most of the money lost on a given vehicle can often be reduced significantly with similar expertise and knowledge of the business' remarketing side.
The first step in turning leasing business around is to know and understand each of the remarketing channels and learn how to maximize the opportunities afforded by each.
The Lessee
The most cost-effective method of remarketing an off-lease vehicle should be obvious: sell it to the lessee. Unfortunately, this option is often overlooked because most financial institutions lack the skill, manpower, or a combination of both, to seize the opportunity.
Whereas evaluating risk is a science, selling is an art. In order to sell the vehicle to a lessee, employees must know and understand the most common customer objections, the “Four Ps” — price, product, person and procrastination.
While you can't change the product, price is negotiable, procrastination can be overcome, and the lessee can be influenced in a positive manner. However, learning to effectively manage objections requires time and training. Without it, you can expect to lose or leave money on the table on every vehicle.
Turn the lessee's attention from the bottom-line price to smaller, manageable, monthly payments. You mitigate loss, continue to make money on the vehicle after the lease has ended and maintain a relationship with your customer.
Maximizing wholesale revenues
No matter how talented, a salesperson can't make every sale. In this situation, maximizing wholesale revenue becomes the priority. While the majority of off-lease vehicles are routed through physical auctions — a reliable and effective channel — most financial institutions don't take advantage of the number of different auctions, auction services, and methods to increase wholesale auction prices.
Certain vehicle remarketers, either because of their relationship with the auction or because of sheer volume, are granted the best positions at the auction. The result: their cars sell first and at the highest prices. By exploring other auctions, you can increase your chances of finding an auction that will better represent your vehicles.
The Internet can provide several benefits. The most obvious is the potential to reach a large — even national — pool of buyers, increasing your vehicles' exposure to qualified prospective buyers.
Online auctions generally reduce the sell time, and do not preclude you from concurrently moving your vehicles toward physical remarketing channels. This enables you to reduce vehicle depreciation and free up capital.
Some companies have begun to add other features designed to provide value-added services to remarketers. For instance, Autodaq Corp. supplements its national online auction by offering private label auctions where companies can offer vehicles to a predetermined set of buyers.
Auto dealers' use of the Internet to search for and purchase vehicles is growing, fast. A Q2 Brand Intelligence study indicates 31% of dealers say they currently use the Internet to locate inventory, and 12% already purchase vehicles at Internet auctions.
Remarket effectively
Successful selling to the lessee requires a skilled, incentivised sales force. If your team does not currently possess the skill to sell cars in volume and maximize the sales price — don't blame them, train them!
Have you developed an effective response to leasing customers' most frequent objections? Have you role-played those objections and those responses to ensure that you have a confident, competent sales force? Have you developed a game plan and run your team through the plays?
Just as Joe Montana would have been a horrible defensive lineman, people in the leasing industry need specific skill sets.
The vehicle leasing business is still good. But know how to play both sides.
David Walsh is a vice president of Autodaq Corp. and runs the lease end-of-term operations from the company's Minneapolis office.
