Automotive News F&I Special Sections of 2008

TOUGHING IT OUT Upside-down customers. Rising loan defaults and repossessions. A dying subprime market. Today’s receding economy has auto dealers hunkering down and finding ways to make money in the F&I office and elsewhere in their stores. In this special section, we look at resilient dealers who keep profits up while the chips are down. Finance & insurance INSIGHT MAY 5, 2008 • 25 “There’s a trick to it,” dealer John Klein says about building a used-vehicle leasing business. - MATT LUDTKE Used-vehicle leasing boosts showroom traffic Dealers: Strategy can cut customers’ monthly payments and inspire loyalty Donna Harris dharris@crain.com s many as one of every five used cars and trucks that dealer John Klein has sold in recent years has been a lease deal. That’s unusual on several counts. Leasing tends to flourish at luxury dealerships in metropolitan areas along the East and West coasts. Klein’s ChevroletBuick-Pontiac and Chrysler-Dodge-Jeep dealerships are in rural Clintonville, Wis., with a population of 4,500. Even more striking is Klein’s reliance on leasing used vehicles. Few dealers, even in large urban markets, have placed a A similar emphasis on that segment. Leases represent less than 1 percent of used-vehicle sales at franchised dealerships, according to the AutoCount market research firm. Klein says his leasing operation is responsible for “a big portion” of the 20 percent increase in his new-vehicle sales so far this year over 2007. He says he uses leasing to inspire customer loyalty. In a tough economy, new-vehicle dealers could attract customers with used-vehicle leasing, industry analysts say. Budget-challenged shoppers are more likely to trade down to a used car or truck. And leasing helps dealers offer customers a lower monthly payment for a shorter term than a finance contract for the same vehicle. “Dealers can use used-vehicle leasing to create floor traffic,” says Tom Wirth, president of indirect lending for U.S. Bank, one of the nation’s largest vehicle leasing companies. “We encourage that.” Repeat customers Klein says he sells about 35 used vehicles and 15 new vehicles a month. He estimates 75 percent of his lease customers return to his dealerships to lease or buy another vehicle. see LEASING, Page 26

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