Honda Aims for Higher Lease Ratio
Honda has a much lower lease ratio, 25%, than Acura’s 40%-42%, a top company official says.
April 1, 2014
SAN DIEGO – While he has a full plate of wishes, one of the key changes Honda’s new senior vice president hopes to bring about is increasing the brand’s lease penetration.
When he was at sister brand Acura, Jeff Conrad, Honda Div.’s new senior vice president and general manager, saw leasing increase to 40%-42% of Acura’s overall U.S. sales volume.
But among Honda’s U.S. dealers, leasing has a much lower ratio of 25%.
“As (Honda is) a mass-market brand, the chance of getting it up to 42% is probably a little slim, but can it grow from 25% to 30% to 32%? There’s certainly room for opportunity,” Conrad tells WardsAuto here in an interview during a ’15 Honda Fit media preview.
During his time at Acura, Conrad discovered dealers often would claim customers prefer to buy, not lease, a new vehicle. But when he probed deeper, he found the option wasn’t always made available.
“(You’ll ask dealers), ‘When you’re talking numbers, do you offer every customer a lease deal as well as a finance deal?’” he says. “‘Well no,’” they’ll say.
“OK, can you really say your customers don’t lease, (if) you really don’t offer it unless they’re asking for it?”
Conrad says leasing not only is beneficial to Honda’s business but to a dealer’s own financial well-being, too.
He notes in 2008-2009, Acura dealers with a strong lease portfolio fared better during the recession, as they had a better opportunity for repeat business.
“Those (lease-heavy dealers) got impacted, but they didn’t get impacted at the same rate, because they had people that had to come in and they had to make a decision: they were either going to buy that existing car off lease or turn it in and lease something else,” he says. “Oftentimes it turned into a new-vehicle sale.”
Other items on Conrad’s agenda at Honda include the old stalwarts of more volume and higher retention rates.
He won’t disclose Honda’s U.S. sales goal for 2014 but says the automaker hopes to improve on 2013’s 1.34 million units, the second-best annual volume for the brand in the U.S.
With American Honda’s recent restructuring, improving sales and owner-retention rates should become easier, Conrad says.
Three weeks ago the automaker announced Honda and Acura would become their own divisions within American Honda, with Conrad, formerly vice president and general manager-Acura sales, appointed to lead Honda and Mike Accavitti, senior vice president-auto operations for both brands, helming Acura.
Previously American Honda sliced the company up by function, with a sales unit having responsibility for field sales and regional advertising and another unit, auto operations, helming product planning, public relations and national advertising.
As much as the automaker tried to avoid it, people got silo-ed and communication between sales and auto functions was stymied.
“So what we’ll end up doing – we haven’t done it yet, we’ll basically reorganize the seating in our place, and have everybody on the team sitting near each other, so communication’s going to be dramatically improved,” Conrad says.
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