Managing End-of-Lease: An Inside Look
The first three months of 2015 represented the best quarter ever for certified pre-owned sales, according to Autodata Corp., which said dealers moved 614,450 CPO vehicles in Q1.
Not only did that follow the fourth straight year of record CPO sales, it also followed a fourth quarter in which leasing’s penetration of all new vehicles financed reached nearly 30 percent, according to Experian Automotive. Not to mention fourth-quarter leasing volume was up 3.6 percent year-over-year, Experian said.
And since we’re now a few years into the lease market’s resurgence, lease maturities are expected to rise from 2.2 million in 2014 to 2.3 million this year and escalating to 3.1 million in 2016, according to data shared by J.D. Power at the NADA/J.D. Power Automotive Forum in New York in late March.
Clearly, these three trends go hand-in-hand: ramped-up leasing fuels off-lease volumes, which can give dealers an ample crop of vehicles ideal for certification and thus meet this burgeoning consumer demand.
Amid all of the growth in these three metrics, Auto Remarketing spoke in early 2015 with Paula Tompkins, the chief executive officer of ChannelNet, whose company provides digital customer acquisition, retention and conquest services.
Part of that includes helping manage the lease turn-in process, lease pull-aheads and CPO lead-generation.
We talked to Tompkins about some of the trends in these areas, and she provided a walk-through of where ChannelNet helps out.
Lease Ending? ‘Gathering Intent is Critically Important’
Starting with leasing, Tompkins said that since the recession, this segment has been “full steam ahead.”
“A lot of these vehicles that are being turned in by consumers are in pretty darn good shape. If they’re fleet vehicles or especially in the higher, more luxury segment, you can get some pretty fantastic vehicles,” she said.
When it comes to preparing the lessee for the end of that lease, here’s how ChannelNet goes about making sure that process runs as smoothly as possible:
Depending on the wishes of the client (which is typically the captive lender or financial institution writing the lease), ChannelNet typically begins communicating with the lessees through text or email somewhere between 180 and 210 days before the lease ends. The email links the customer to an informational personal microsite.
“We start to prepare them, psychologically, for the fact that in a fixed amount of time, they’re going to have to make some decisions about their vehicle,” Tompkins said.
The company begins a digital dialogue to get the lessee thinking about the end of that lease and preparing for what he or she wants to do next. In other words, getting the lessee to begin exploring the options of doing another lease, buying the car or buying a new car. The company may share online the dealer’s inventory with the customer, as well.
Additionally, the ChannelNet solution encourages the lessee to check out any dings and dents on their current ride so that they can get them fixed ahead of time.
When it’s 120 days away from the lease ending, ChannelNet will send another round of information to that customer digitally. Then 90 days out, the company begins to specifically ask the lessee what his or her intent is.
Tompkins says it is “critically important for the dealer, for the OEM and for the finance company” to begin thinking about what the customer says he or she is planning to do with the vehicle as early in the end-of-term process as possible.
“That allows dealers to start planning what’s going to happen as the customer moves through the process. Gathering intent from the customer is critically important,” Tompkins said.
And that process with ChannelNet is done digitally through text or email, and the data reveals it is quite effective, she said
“This is a new way to go about getting intent and it has proven to be extremely popular,” she said.
Then, Tompkins said “the minute we gather the customer intent,” the information is sent back to the call center, OEM, finance company and to the dealership to avoid repeating the same questions or information to the consumer.
Next on the agenda is to get the lessee to start the self-inspection process, so that there are no surprises later if the customer learns he or she has to fix the vehicle in order to avoid fees for certain items. That, of course, can lead to dissatisfaction with the turn-in process, Tompkins said.
This ahead-of-time thinking also helps the dealer, OEM and captive.
“We work hard to ensure the lessee gets an inspection and report at 90 days, 60 days, 45 days and 30 days to prevent surprises. Gathering this kind of information early in the process also helps the dealer figure out, is this vehicle something I want to take back into my used inventory? Or for the manufacturer, is this vehicle a candidate for CPO” she said.
“Rather than it all happening (at once), the dealerships have some time to plan, organize and do their homework and make some decisions around what they want to do with the vehicle,” Tompkins added. “Do you want to go ahead and let that one to go auction? Do you want to bring it in to your used inventory?”
To help things run smoother for all parties involved at turn-in time, ChannelNet’s digital solution allows customers to purchase miles to tack on to their limit if they have run over.
“Again, this is all about really trying to help get the customer, the dealer, the manufacturer and the captive all on the same page. It gives pre-notice to the captive, to the dealer and to manufacturer about what the intent is, what kind of condition that car is in and what they can do with it,” Tompkins said.
“The customer can make informed decisions and at the same time, the OEM and the captive can determine, ‘This is a good customer, we don’t want them defecting, we’re going to send a pull-ahead offer, because this car has low-mileage, this car is in good condition, and this customer has made every payment on time,” she added.
“When a customer is at the lease-end, it’s just about the only time they know you’re going to be in the market and the customer is going to do something,” she continued. “We have tremendous success with things like pull-ahead offers, and making those as part of the communication plan with the customer.”
So, say the customer chooses to return the car. If it’s determined that the car is a good fit for CPO, the challenge now becomes selling and moving that car.
Citing data from Ford Motor Co., ChannelNet indicates that the demographic profile of the CPO customer closely mirrors the new-vehicle buyer. FICO scores and monthly incomes are higher for these consumers, who also make larger down payments, according to the same data.
“So, they’re really desirable, but elusive,” Tompkins said.
They also appreciate certified pre-owned because of the warranty, condition of the car, its low-mileage and value proposition.
The task now is to reach these shoppers and bring them into the store. ChannelNet conducts a campaign and buys information about customers “that would fall within the CPO segment.” The company sends these consumers a text message or email inviting them to click and go to their own personal microsite.
Tompkins said this process is much like the end-of-lease process, but this time around, of course, it’s about selling the customer on the benefits of buying a CPO vehicle.
When the shopper visits the microsite, he or she may view all the dealer’s CPO inventory and receive targeted offers based on their profile, she said. Additionally, the microsite provides a monthly payment calculator and allows the shopper to complete a credit application or receive a pre-approval.
Once that is complete, the lead is sent to the dealer’s CRM.
Tompkins went on to say she has found CPO to be “almost like a third brand,” because it appeals to the new- and used-car buyer who wants a high-quality vehicle.
“And what a lot of our dealers have told us is, people come in, wanting to buy a new car and they end up buying a CPO vehicle,” she added.