Does used-car leasing, particularly in the certified pre-owned space, make sense?

At least one industry leader connected to the leasing side of business is saying yes — as long as it is done correctly.

Around the time of the recession, many shied away from leasing, particularly on the used-car side. Meanwhile, new-car leasing has roared backed. But what about used leasing? What is the current temperature there?

Scot Hall of Swapalease.com says there is some used-car leasing offered in the U.S., albeit in “small batches” or offered only by regional players. But the potential for more is there.

“It hasn’t completely gone away,” he said. “But what has completely gone away that existed pre-recession are national banks that had used-vehicle leasing programs.”

Hall argues that instead of pulling out of used-car leasing altogether, it would have been better for leasing companies to simply “pick and choose” to only offer leases in the used-car models and segments that are profitable for them, leaving out the ones that are not.

“And I think the smart leasing companies moving forward are going to keep that in mind and say, ‘You know what? We control this, and we’re going to permit leases on these types of vehicles and unfortunately, this small segment of vehicles here hasn’t proved to be a winner for us; it’s proved too risky, we’re just going to leave that out of the equation,’” Hall said.

“I think this also spills over to the captives, as well, and I think it especially fits well with the certified pre-owned programs, because most of those contain — in fact, all of those contain, to my knowledge — some sort of extended factory warranty, which is something that people like to have on leases,” he continued. “I’ve seen maintenance plans added as well.”

Hall added: “Those cars are generally going to be serviced to a high degree and reconditioned to a high degree, so setting up, say, a short three-year lease on those — or maybe even a two-year lease on some of those cars — I don’t think there would be a lot of risk, if it’s done correctly from the leasing company.

“I think it would benefit the consumer, and especially as more and more leases are coming back off the new end, this would be another avenue to help dealers and manufacturers move those off-lease vehicles from a remarketing perspective,” he continued.

Editor’s Note: Have an opinion or insight into used-car or CPO leasing and its risks or rewards?  Auto Remarketing wants your take. Email joverby@autoremarketing.com to share your thoughts.  And for a look into how Swapalease.com contends leasing could thrive and benefit the subprime consumer segment, watch for a future report from our sister publication, SubPrime Auto Finance News.