The World Finally May Be Ready for Used-Car Leasing

The world may finally be ready for pre-owed vehicle leasing.

At least that's the opinion — and hope — of Jeff Cook, president of CyberCalc, a provider of interactive lease-evaluation programs.

“We believe that late-model pre-owned leasing is an unexplored frontier that can yield much higher gross profit, more value for the customer's dollar and as much as 56% shorter trade cycles,” he says.

Touted as the next best thing about 10 years ago, used-car leasing never gained the traction its advocates had expected in part because leasing overall declined in the early years of the decade.

Leasing has rebounded since zero-percent financing prodded many consumers to buy vehicles instead of lease them. Leasing, which dropped to 16% of new-vehicle delivers in 2002, now is back up to about 25% penetration.

Although it is not for everyone, pre-owned leasing is a smart option for today's value conscious consumer, yet few people realize its potential — particularly with the current emphasis on certified pre-owned vehicle programs, Cook says.

The pre-owned opportunity is largely misunderstood, says Mike Hernandez, president of D&M Leasing and a CyberCalc client.

“Dealers have never grasped its benefit and consumers are unaware of the opportunities it presents,” he says. “We are looking at pre-owned as our biggest avenue for growth in the coming year.”

Because lease payments are dependent upon the relationship between acquisition cost and residual value, and because wholesale values can fluctuate dramatically while residuals remain constant for up to two months, there will always be a select number of vehicles that lease much better than they should.

“And with the average lease customer returning to the market in 33 months versus the average finance customer in 59 months, it just makes sense that dealers should look more closely at leasing,” says Cook.

CyberCalc provide leasing software applications to franchised auto dealers, credit unions and independent lessors.

The web-based lease-evaluation programs update lender programs, residuals and money factors. The firm's latest product, called Arbitrage, is designed to identify the opportunities that exist in pre-owned leasing.

“It is no secret that today's retail market is more challenging and more competitive than ever before,” Cook says.