AutoNation Micro-Leases: Brilliant or Blah?

Recently, AutoNation rolled out a new pricing platform called AutoNation Mobility, featuring six- and 12-month “micro-leases” where the buyer can set their down payment and lease terms right on the website and then order a car from inventory.

I was struck by the timing of this rollout, now live in California and Florida. It happened just as inventory began returning to dealership lots; just as purchasing used-car inventory at fair value at auctions became a challenge; and just as consumer affordability began to hit a headwind with an average monthly payment of $750.

Could AutoNation be on to something brilliant here?

Step back and look at this from an inventory-management perspective. If you’re AutoNation, you’re now able to lease out a car for six months to a year, the consumer pays a good percentage of the early depreciation, you receive back this car with very low miles and are able to resell it at a super-premium right from your own vertical inventory.

AutoNation effectively is creating their own premium used-car inventory as a result of this micro-lease program.

How will dealers compete with this new affordability platform without having their own captive finance team under their wing?

Let’s talk about the marketing advantages of this idea. The consumer is able to select their down-payment money and payment amount. That sense of customization is clearly a marketing win.

Now, let’s talk about the other marketing tactics that result from this idea. AutoNation could promote a very affordable monthly payment and an easy opt-out within six months to a buyer. This idea could be popular with commuting consumers looking for a short-term transportation fix, versus renting a car.

This also could appeal to early adopters who love owning new models but quickly get bored by them and soon want to trade them out. This sets up a competitive factor for other dealerships in the market if they don’t offer this feature.

So, you have to give credit to the leadership at AutoNation for coming up with a solution to affordability perception, premium used-inventory access and a sense of control of a consumer’s final payment, all while keeping the AutoNation customer close at lease-end time.

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Bottom line is that at some point in 2023 a major automotive player was going to make a move to grab market share and used-car profits. Could this be it?

Stay tuned.

Adam Armbruster (pictured, above left) is a senior partner in the retail and broadcasting consulting firm Eckstein, Summers, Armbruster & Co.