Ally Financial announced the launch of a new financing product this morning on new 2011 and 2012 General Motors and Chrysler vehicles that gives customers the option of treating their vehicle purchase like a lease and selling it back to the lender at the 48th month at a fixed price.
However, if the customer decides he would prefer to keep the vehicle, Ally’s Tim Russi told Auto Remarketing, the consumer can just continue to make payments through the 48th month, and nothing changes.
So what’s the name of the new product? Ally Buyer’s Choice. The idea behind the product is to offer customers the advantage of both leasing and buying. It allows customers to own their vehicles with a fixed rate and payment, with the option to sell. Customers can select between 60-month and 84-month contracts.
“This offers flexibility and financing. It’s the best of both worlds. We think this creates a new option for the dealers and the consumers. It can help dealers sell more cars,” Ally’s executive vice president of North American operations told Auto Remarketing.
Touching upon the dealer perspective, Russi went to say, “This will drive some business to those who offer our product. Hopefully, it helps dealers generate incremental sales. For the consumers who elect to remarket the vehicle, we will end up remarketing these back to the dealers first. This will provide inventory opportunities for dealers.”
Keith Donnelly, of Westbury Chrysler, Jeep, Dodge in Long Island, N.Y., told Auto Remarketing he can definitely see the benefits.
“Vehicle auction prices are very high right now. Very high. Bringing a car back and being the grounding dealer is always a benefit. You can have a customer come in, sell him a car and have him come back in four years and buy another. This is a captive customer I can sell another car to. Then, as the grounding dealer, I also have the opportunity of buying the used car. It’s a win-win-win," he said.
“I can make three sales out of a customer with this, and they like the lease option,” said Donnelly. “You do the right thing, take care of the lease customer and they will buy again.”
From a traditional perspective, Russi pointed out that at about the 48th month of ownership, the consumer is trying to decide what to do with a vehicle long term.
As a large lessor, Russi said Ally knows how to set residual values and explained that the new product will be run much like leasing deal. As a part of the contract, there will be normal lease provisions; and the company will anticipate a certain condition of the vehicle to set an expected residual value. If the customer does incur excess wear or tear, he can easily decide not to sell the model back and keep it.
“We will have a certain expectation of condition, but this is one of the beauties of the new product. A consumer can keep making the payments if there is excess wear and tear on the vehicle. Or the condition of the vehicle is not what was expected. It is a passive product; the consumer isn’t forced to do anything. It’s an option offering flexibility,” Russi told Auto Remarketing.
Russi went on to point out that for dealers, “A four-year-old vehicle is an attractive remarketing proposition. These are quality vehicles that will be out there. This new product will give the dealer and remarketing community a very good opportunity.”
When asked how many consumers could sell their vehicles back, he said it’s too soon to tell.
“We’re optimistic that this will fill a need and we’ll get traction in the marketplace,” Russi responded.
The new offering is debuting in five markets, including California, Florida, Illinois, New York and Texas. Russi said team members were out training dealers last week in these new markets.
“As we get into new markets, we’ll increase the visibility of it, as well as tools and resources. We’re right now in launch mode and getting people trained,” he said.
As for Donnelly, his store has been spreading the word through newspaper advertisements.
“Consumers are very happy with it. They like that they can get better financing and leasing option through Ally,” he pointed out.