Leasing

Podcast: Scot Hall of Swapalease.com

CARY, N.C. - 

Industry experts like Swapalease.com executive vice president Scot Hall are trying to get a handle on the used-vehicle market — a segment that will be influenced by interest rates expected to continually increase in 2018, despite the recent stock market sell-off, and wholesale prices continuing to fall this year, mostly due to rising supply.

Sharing additional insights with Nick for the Auto Remarketing Podcast about a recent project Swapalease.com orchestrated, Hall dissected how rising interest rates and falling residuals may impact payments of potential vehicle-lease customers arriving at your dealership or applying for financing through your institution.

Swapalease conducted an analysis taking into account a typical vehicle with an MSRP of $35,000.

Here are the assumptions:

— Term: 36-month lease
— Residual: 49 percent
— Interest rate: 4.00 percent
— Monthly payment: $604.83

Here are the breakdowns at varying interest rate levels, as well as a residual rate of 49 percent and 50 percent:

Residual Money
Factor
Monthly
Payment
 50%   3.00%  $573.51
 50%  3.25%  $579.05
 50%  3.50%  $584.60
 50%  3.75%  $590.15
 50%  4.00%  $595.69
     
 49%  3.00%  $582.79
 49%  3.25%  $588.30
 49%  3.50%  $593.81
 49%  3.75%  $599.32
 49%  4.00%  $604.83

 

Hall described these figures in more detail in the conversation available below.

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Holiday luxury model promos result in softer January lease-transfer approvals

CINCINNATI - 

Those holiday ads for vehicles — especially for luxury models — evidently stimulated activity not only at dealerships, but also at Swapalease.com.

While stores might have moved some extra metal that was a gift, the site's lease-transfer approval rating took a tumble in January.

Swapalease.com reported that vehicle lease credit applicants registered a 57.8-percent approval rate in January, down from 62.0% in December.

While the rate slipped on a sequential basis, January’s reading was higher than a year earlier as the opening month of 2017 produced a 50-percent approval mark.

Site officials explained some of the reason for the lower-than-normal approval rate can be attributed to the higher-than-average number of applicants registered in January. With holiday promotions and strong emphasis on luxury lease offers typically signaling heavy applicant volume in December, the marketplace saw a continuation of high volume applicants opening the New Year in January.

With this higher volume comes a variety of credit histories, including more applicants with less-than-stellar credit approved by the banks, according to Swapalease.com.

During the past three months and dating back to November, the lease approval rate has come in at  62.2 percent. The majority of applicants are interested in taking over leases in the mid- to high-end luxury categories, including higher-end SUVs. These vehicles come with an average monthly payment of $499 or higher.

“We’re continuing to see a healthy consumer appetite in taking over existing leases in the online marketplace, and a large number of these interested parties feel confident in the monthly payments they’re willing to take on,” said Scot Hall, Executive Vice President of Swapalease.com.

“The banks and lease companies have remained firm in their criteria for approvals, which is why we continue to see a slightly higher number of those still not being approved,” Hall continued.

“Credit profile remains extremely important when applying for a lease across any segment or type,” he went on to say.

Nissan’s captive joins AutoGravity

NASHVILLE, Tenn. - 

Add another foreign OEM’s captive to the list of finance companies now available through AutoGravity.

Nissan Motor Acceptance Corp. (NMAC) announced on Tuesday it is joining AutoGravity to help consumers looking to acquire Nissan with personalized retail and lease preapproval offers through digital credit shopping on their smartphones.

Through this collaboration, OEM officials indicated consumers will be able to select any Nissan vehicle and see finance offers from NMAC within minutes on their mobile device.

NMAC financing options are currently available on the AutoGravity app in California and will be available nationwide in mid-2018, according to a news release.

“NMAC wants to provide consumers the most seamless automotive financing process possible,” NMAC president Kevin Cullum said. “We use smartphones to manage many aspects of our lives, so it’s only natural for digital to be the next evolution in automotive financing.

“With our participation on the AutoGravity app, we are able to utilize this cutting-edge technology to connect with digital-savvy consumers and provide them with NMAC loan and lease preapproval options,” Cullum continued.

AutoGravity highlighted another milestone just last week.

The FinTech platform that leverages mobile technology to allow consumers to apply for financing said it surpassed $2 billion requested financing in 2017.

AutoGravity has built partnerships with many of the largest banks and financial institutions in the world, including key captives such as Mercedes-Benz Financial Services, Audi Financial Services, Volkswagen Credit and Hyundai Capital America.

And now Nissan’s captive is in the fold, too.

“Our collaboration with Nissan is another great example of how AutoGravity is bringing technology to the forefront of the car-shopping experience,” said Andy Hinrichs, founder and chief executive of AutoGravity.

“As the ‘digital glue’ that brings buyers, dealers and finance providers together through one convenient smartphone app, AutoGravity is enhancing the way consumers find and finance a vehicle — right from the palm of their hands,” Hinrichs added.

Based in Irvine, Calif., AutoGravity is using proprietary technology to revolutionize the car financing process by connecting consumers, finance companies and dealers through a modern digital marketplace. AutoGravity partners with leading providers to offer consumers convenience, transparency and choice, sending ready-to-buy users to dealers across the country.

The AutoGravity app guides automotive shoppers through an intuitive four-step digital retail process:

1. Select any make and model of any new or used vehicle available in the United States.

2. Browse thousands of vehicles by trim, color, body type and other attributes. The platform shows the closest dealers and inventory based on vehicle preference and geo-location.

3. Search for financing with smartphone simplicity. Users can scan their driver’s license and connect to social media to quickly pre-fill the application.

4. Receive up to four personalized preapproval finance offers in minutes and complete the purchase or lease at the dealership selected by the consumer.

GM Financial expands national footprint to spread off-lease inventory

CARY, N.C. - 

This year, GM Financial is expanding its volume footprint nationwide — recently opening distribution centers in the Detroit area, Maryland and New York — to help move more vehicles across Southeast and Midwest markets that wouldn't normally get as many off-lease returns, says GM Financial vice president of remarketing, auction operations John Sullivan.

“So pretty much every one of our auction partners in 2018 will see an increase,” Sullivan explained during a late-January phone interview with Auto Remarketing.

In regards to the number of vehicles that are expected to show up at auction, he said “we will have a pretty good increase, probably in the 50-percent range for 2018 that is actually sold at physical auction, depending on how much the retail customer purchases and what we’re able to sell on the GMF DealerSource, which is our online platform.

“As far as volume goes, we haven't finalized the numbers for 2017 yet, but they should come out shortly,” he added.

GM Financial will release its 2017 operating results on Feb. 6, according to GM Financial spokesperson Nikki Hall-Branch.

In early January, Cox Automotive’s Jonathan Smoke explained that off-lease units will provide growth in units at auction and that the composition is changing this year.

There will be nearly 300,000 more off-lease cars and trucks that will return to the market this year compared to 2017 for a grand total of 3.89 million off-lease units.  

“Off-lease maturities are the source of off-lease vehicles at auction; we are past the peak growth in off lease but we have at least two more years left of growth in the volumes that will be coming to auction. In 2018, an additional 290,000 vehicles would theoretically reach the end of their lease,” Smoke said.

“That number will likely be influenced by lease pull-ahead programs, which were ramped in the fourth quarter; and remember, a substantial number never end up consigned as an off-lease as they are either purchased by the consumer or grounded by the dealer,” he explained.

On a localized level, Columbus Fair Auto Auction in Ohio said GM Financial began expanding their lane presence earlier this month due to increased off-lease volume.

Along with adding two simultaneous lanes that will run in lanes 7 and 8 every week, the auction said GM Financial has started running bi-weekly closed factory sales on Tuesdays and will also continue to offer a bi-weekly repo sale this year.

“CFAA has proven to us in the past that they are capable of handling large volume sales," GM Financial’s Chris Watkins said in a news release announcing the recent expansion. “Opening up an additional lane will help provide dealers in the central Ohio area with a wider variety of off-lease inventory.

Consumers get charged up about alt-fuel units

CARY, N.C. - 

As consumer perception changes about the vehicles’ capabilities and limitations, along with automakers pushing more models and options into the market, the volume of leased alternative-fuel vehicles is on the rise.

Swapalease.com shared data from its own site on Wednesday as well as analysis from Bloomberg New Energy Finance to shed light on trends about hybrids and electric vehicles (EV). Site officials indicated their analysis shows that alternative fuel vehicles now make up roughly 7.5 percent of the Swapalease.com marketplace, up from 5.5 percent back in 2015.

Swapalease pointed to Bloomberg’s efforts considering roughly about 31 percent of all new models rolling over the curb at franchised dealerships are attached to a lease contract. The Bloomberg report showed that as many as 80 percent of battery electric vehicles, and 55 percent of plug-in hybrids are leased.

Tesla, which doesn’t sell through a dealer network, isn’t included in these figures, according to Swapalease’s recap of the material.

Changing mood about these vehicles

So why are consumers gaining more interest in these vehicles while prices at the pump remain below $3 per gallon throughout most of the United States? They might be finding more concrete information about these models.

In December, Autolist.com released a study based on a user survey that shows buyers misunderstand EVs and the used EV market.

The Autolist.com study combined a user survey of 1,249 vehicle owners and market data from 17,738 used vehicles. Here are some key findings from the survey and assertions by Autolist.com:

• Public perception: The average buyer thinks a quality used electric vehicle costs $5,000 more than an equivalent gas vehicle.

• The facts: A used 2015 Nissan LEAF is cheaper than its gas class-competitors (the equivalent Honda Civic or Toyota Corolla).

• Public perception: Aside from vehicle range, reliability is the biggest concern of prospective EV buyers (41 percent of buyers are most concerned about EV).

• The Facts: According to user ratings, the 2015 Nissan LEAF and Chevrolet Volt have better than average reliability, with the Nissan LEAF scoring better than the Honda Civic and the Toyota Corolla.

The entire project by Autolist.com can be found online here.

What’s available to lease?

Turning back to the Swapalease analysis, the information showed that the Toyota Prius represented 47 percent — nearly half — of the entire alternative-fuel inventory on Swapalease.com at the end of 2017, down from 52 percent in 2015.

Tesla currently holds 23.3 percent of Swapalease.com alt-fuel vehicle inventory, followed by the Chevrolet Volt (14 percent) and the Nissan LEAF (11.2 percent).

Other manufacturers and models make up 5 percent of the alternative-fuel lineup on Swapalease.com.

Scot Hall, executive vice president of Swapalease, noted that Tesla has grown the most share of the alternative-fuel inventory on Swapalease.com between 2015 and the end of 2017, jumping 25 percent during that time.

The Prius, in comparison, has grown just 4.2 percent during the same time frame.

While the Chevy Volt has remained almost flat in growth during those two years, Hall pointed out that the addition of the Chevrolet Bolt has also significantly added to the Chevrolet alternative-fuel lineup..

“We fully expect alternative fuel vehicles to continue their growth in not only the Swapalease.com marketplace, but in leasing overall,” Hall said.

“Alternative-fuel technology is a microcosm of the rationale for leasing in that people realize the technology improves significantly in just a few years, therefore they want the ability to upgrade and change into a different vehicle during that time frame,” Hall said.

Prospects for alternative-fuel vehicles in 2018

The analyst team at Edmunds is thinking that 2018 is germinating to be the greenest year yet.

Edmunds analysts project that overall market share for green vehicles (EVs, plug-ins and traditional hybrids) will reach 4.4 percent in 2018, compared to an estimated 3.2 percent in 2017. Edmunds also predicts sales of plug-in vehicles will double in 2018 as compared to 2017, outselling traditional hybrids by the end of next year.

“Even if Tesla doesn’t meet its full production commitments for the Model 3 until midsummer, 2018 will still be a hallmark year for green vehicles,” said Jessica Caldwell, Edmunds executive director of industry analysis.

“The price of batteries is coming down, EV range is rising, and shoppers will have more choices than ever. However, the lower end of the EV market will feel pressure once federal tax credits start to wane toward the latter half of the year, which will give the first indication of how ready the segment is to stand on its own,” Caldwell continued.

Caldwell also touched on what the growth in alternative-fuel units means for what automakers might be doing well beyond this year.

“The rise in green car sales is really just a precursor to what OEMs have in the works for the autonomous vehicles promised for 2019 and 2020,” Caldwell said, adding, “2018 will be a year of right-sizing for the present while putting some of the critical building blocks in place for the future.”

Monthly lease prices stay steady for 33 vehicles

CINCINNATI - 

The calendar year might have increased by one digit, but the analyst team at Wantalease.com is seeing that prices on most of today’s popular vehicle leases are holding steady in January.

Compared to December, site analysts determined that 33 different vehicles maintained their prices.

Wantalease.com noticed only one vehicle is currently offered for less than $150 per month on its site. That’s the Honda Civic LX, which is currently priced at $149 per month, making it the most affordable vehicle for the month.

Analysts pointed out that the Honda Civic LX has maintained this lease price for the past five months.

While most vehicle prices held steady entering January, Wantalease.com insisted that dealers continue to offer aggressive prices on entry-level luxury vehicles in particular.

Three entry-luxury cars are currently offered at less than $300 monthly. The Audi A3 2.0T FWD Premium and the Lexus IA 200t (Turbo) are both priced at $299 per month. The Acura ILX is currently offered at $199 per month, and has maintained this price since August.

“Overall, lease prices seem to be holding steady as we kickoff the New Year,” said Scot Hall, executive vice president of Wantalease.com.

“While prices are holding steady for the time being, it will be interesting to see if dealers introduce a new wave of promotions to take advantage of tax rebates and the recently changed tax rate,” Hall continued.

The vehicle that saw the largest price drop entering 2018 is the Toyota RAVA 4 LE FWD.

This vehicle, which is currently offered at $199 per month, decreased in price by 16.42 percent in comparison to December.

On the other hand, the RAM 1500 saw the largest increased in monthly payment, rising by 37.40 percent in December. This truck is currently offered at $329 per month.

Luxury impact on December lease transfers lower than usual

CINCINNATI - 

Demand for luxury models didn’t impact lease-transfer applications in December as much as the analyst team at Swapalease.com typically sees during the closing month of a year.

Swapalease.com on Wednesday reported vehicle-lease credit applicants registered a 62.0 percent approval rate for December. The reading decreased slightly from November’s rate of 67.5 percent.

Site analysts explained there is always a heavy emphasis on holiday promotions for luxury vehicles in December. More shoppers interested in these leases typically mean higher volumes of lease applicants, which also come with a higher number of applicants with a variety of credit standings, according to Swapalease.com.

Compared to lease credit approval numbers for the same month in past years, analysts explained a 62.0-percent approval rate is higher than the recent average.

Swapalease.com went on to pointed out that last year was volatile for lease credit approvals, especially compared with 2016 levels. Analysts noted 2017 saw higher volatility due to factors such as increased numbers of applicants, which can decrease the number of approvals, natural disasters disrupting normal leasing trends, and pockets of well-qualified shoppers with the appropriate credentials for lease takeovers that affected the credit approval rates.

“The increased interest in luxury vehicles around the holiday season means that fewer applicants are typically approved for leases,” said Scot Hall, executive vice president of Swapalease.com.

“Looking ahead to 2018, we have historically seen stronger lease credit approvals in the spring, and we are hopeful that trend continues this year,” Hall continued. “With auto sales falling slightly in 2017, many dealers and OEMs are expected to keep leasing at a healthy level, with plenty of promotions and aggressive pricing into 2018.”

October lease transfer approvals rebound from this year’s low point

CINCINNATI - 

After bottoming out in September, Swapalease.com noticed a rebound in vehicle lease transfer approvals in October.

The site reported that vehicle lease credit applicants registered a 55.6 percent approval rate for October. The lease credit approval rate improved over previous month’s rate of just 47.6 percent, which represented the lowest percentage of approval so far in 2017.

Swapalease.com explained that consumer confidence is likely playing a role in the improvement in automotive lease credit approval numbers.

During the month of October, consumer confidence reached the highest level seen since December of 2000, according to CNBC. Analysts explained this increase in consumer confidence suggests that the remainder of 2017 could see favorable economic conditions, which may result in a positive impact on auto lease credit approval rates.

During the last three months, Swapalease.com noted that the vehicle lease credit approval rate has registered at just 59.2 percent, similar to what the numbers showed the same time a year ago (60.2 percent) entering the final months of the year.

“We’re hopeful that the lease credit approval rate will continue to increase as we close out the year,” said Scot Hall, executive vice president of Swapalease.com. “However, we’ll certainly keep an eye on these trends as end-of-year sales and incentives may draw more than average shoppers, which could bring back the credit approval fluctuations.”

TFS partners with developer to create mobile rental solution for rideshare drivers

PLANO, Texas - 

Toyota Financial Services (TFS) announced Wednesday a partnership with Launch Mobility to develop a product designed to make previously leased vehicles available for short-term rentals to rideshare drivers.

The companies are currently working on a pilot they expect to introduce to select markets by the end of the calendar year, according to TFS.

“We are uniquely positioned to meet the needs of drivers who are interested in ridesharing but lack an appropriate vehicle,” TFS president and chief executive officer Mike Groff said in a news release.

“TFS has the off-lease vehicles, Launch Mobility has the technology, and Toyota dealers have the geographic presence and unparalleled vehicle servicing capabilities.”

In addition to input from Toyota's network of dealers, TFS said development of the new product will include the use of resources across the Toyota organization such as its global Mobility Services Platform developed and operated by Toyota Connected.

“With its commitment to innovation, Toyota Financial Services is a great partner for our robust and flexible solution that enables clients to quickly launch, experiment, and scale in the mobility services space,” added Paul Hirsch, chief executive officer of Launch Mobility.

J.D. Power ranks Ford Credit, Lincoln Automotive Financial Services top lenders in customer satisfaction

COSTA MESA, Calif. - 

Differences in the execution of the digital application process has contributed to a significant performance gap between top and bottom performing lenders, says J.D. Power’s latest U.S. Consumer Financing Satisfaction Study.

The study measures overall customer satisfaction in the following categories: billing and payment process; onboarding process; phone contact; and website.

When it comes to the range of services that can be performed online, top-performing mass market and luxury lenders rate notably higher than the lowest performers, the study shows rates of 8.75 versus 7.93 and 8.85 versus 7.54, respectively.

With a score of 857, Ford Credit ranks highest among mass market brands. BB&T/RAC ranks second, and Honda Financial Services ranks third. Both institutions have a score of 855, according to J.D. Power.

Among the luxury brands, Lincoln Automotive Financial Services ranks highest with a score of 890. Lexus Financial Services ranks second (875), and Acura Financial Services (869) ranks third. 

“With such erratic approaches to digitalization, many auto lenders are failing to successfully capitalize on tremendous cost-cutting opportunities that have proven to boost customer satisfaction,” Jim Houston, senior director of automotive finance at J.D. Power said. “With some lenders varying widely on ease-of-use satisfaction scores for their digital offerings, a huge opportunity is going unmet by many.”

Interestingly, while digital loan applications generate significantly higher satisfaction among both mass market and luxury customers, J.D. Power found that many also wait longer for a credit decision than those who apply through dealer representatives.

Only 30 percent of customers who applied online received a credit decision within 15 minutes, compared to 46 percent who filled out a paper application.

Additionally, time given to make first payments also drives consumer satisfaction, according to J.D. Power.

The study shows high-ranking mass market and luxury lenders perform highest on time given to make first payment.

On average, top performers allow a lead time of 21.2 days for mass market customers and 18.4 days for luxury customers prior to the first payment due date.

Autopay and web-based payment drive high customer satisfaction as well, according to the study. Mass market customers who pay by hard-copy check are significantly less satisfied than those who use autopay; 800 versus 851, respectively.

The study is based on responses gathered from July to August of over 14,500 customers who financed a new or used-car loan or lease within the past four years.