Will Decreasing Vehicle Lease Returns Jeopardize Brand Loyalty?

By Trevor Dorchies | July 09, 2012
For many luxury automakers, leasing vehicles to its customers is how the majority of business is conducted. On the other hand, many domestic automakers don't rely on customers deciding to enter a new lease to keep their' doors open. So as many automakers, both domestic and foreign, reported strong sales figures last month, is leasing the only way to build brand loyalty in today's market? During the recession, many finance companies were scared off by the thought of having to lend automakers money. While gas prices went through the roof and the resale value of off-lease vehicles dropped, many finance companies abandoned ship thanks to an economy locked in a tailspin back in 2008 and 2009. Unforeseen losses and unclear future residual values of off-lease vehicles scared finance companies away from the automotive industry, giving customers few options if they hoped to finance their next vehicle. This spelled trouble for luxury automakers like BMW, which sees around 75 percent of its overall total volume leased. Leasing also accounts for around 76 percent of Mercedes-Benz's overall total volume as well. As it stands currently in 2012, leased BMW vehicles outnumber ones being paid for with a loan by 2-to-1. BMW expects about 85,000 scheduled lease terminations this year, which is almost even with figures during the same time last year. However, that's down from 150,000 scheduled terminations in 2010.
Unlike foreign automakers, domestic brands like Ford and General Motors don't have to rely as heavily on leasing. Over the course of the first quarter of 2012, leasing accounted for 31 percent of sales. At the end of this year, Ford is expecting 117,000 leases to end which is down dramatically from 246,000 last year and even more so in 2010 with 408,000 scheduled leases terminated. The current industry average is around 24 percent. General Motors says its' leased vehicles is at 13 percent  which is down from 17 percent last year. Chrysler also saw a smaller number in leased vehicles with 17 percent of sales. According to a report in Automotive News, a customer currently under a vehicle lease has a 63 percent chance of signing a new lease with the same brand for October to December of last year.  However, customers who purchased a vehicle were only 39 percent likely to purchase another one from the same brand. Only 31 percent when from purchasing a vehicle to leasing a vehicle from the same brand after. With so many fewer luxury leases, that brand loyalty may disappear, along with the aggressive sales numbers that come with it. What say you? Are you less likely to get a car from the same brand if you lease it as opposed to buying? Tell us where you stand in the comment section below. Source: Automotive News (subscription required)