After 18 months in the wilderness, leasing is making a return to the Detroit 3’s dealers. For the Asians, things are almost back to the way they were before the Great Recession began. I just ran a lease on a Toyota Tacoma for a client; the payment was almost exactly the same on a new 2010 model as what he’s paying now on a similarly equipped 2008. Yet for the domestics, like Ford and Chevy, it’s more of a case-by-case thing. On some cars they run aggressive specials; others they don’t seem to want to lease at all. Another client of mine was very excited to get a Ford Flex. I’ve loved that big box since its introduction, but have never been able to sell or lease one; early on, the pricing seemed a bit aggressive (prior to Ford’s ‘rebirth’ as a respected manufacturer), and now there is no lease program for the vehicle fro Ford. A big benefit of leasing to a car company is to allow them to subsidize the launch of an avant-garde new car, truck, or SUV into the market, and establish a ‘beachhead’ until the general population catches on to ...

Sales of used, certified cars, trucks, and SUVs has been on a long-term rise. CPO vehicles seem to make sense: avoid the sharp drop that most new cars suffer when they drive off the lot, yet have the peace of mind that comes with a thorough inspection and long term warranty, backed by the manufacturer. Yet a couple of recent transactions have made me investigate things further. A few weeks ago, I had a client switch from the new 2011 Toyota Sienna minivan he had been planning, to a used, certified one. There was nothing wrong with that: it was an exceptionally clean 2008 Limited model with only 12,000 miles on it. But when we investigated what was covered by Toyota over the long term, we were both disappointed. While Toyota offers a comprehensive, 3-month, 3,000 warranty, this minivan’s remaining 3/36 bumper-to-bumper coverage made it redundant. And while the 7yr/100,000 mile limited powertrain warranty that comes on Toyota CPOs is decent, it left the owner exposed to so many potential issues, like failures of the Sienna’s power sliding doors, DVD, or navigation, that he asked me if going the CPO route was indeed the best option. So we ...

Last week we got some signs of stabilization in automotive sales; this week there’s more good news. Transactions prices on new cars went up a whopping $2200 on average, according to JD Power and Associates, and incentive levels dropped. This reflects factors we’ve discussed earlier such as less inventory on dealer lots. Two of the Detroit three did better as well: GM sales were up 5% and Ford 3%. Chrysler still languishes in the toilet though, down 30% compared to October 2008. Industry experts talk of the ‘annual selling rate’, which is a projection of what sales will end up for the year. They’d been in the 9 million range—except during the artificial surge of Cash for Clunkers—and now the word is we’ll end the year with sales of just over 11 million new vehicles. While that’s a monstrous decline from the 16 million we did during peak years, it’s better than expected, and bodes well for the industry’s return to health. And, it (apparently) means that the Clunkers program didn’t ‘pull’ sales from too many following months—something that worried many. The bottom line was that October’s sales were almost the same as those from ...

There are certain buying trends I’ve seen in my time as an auto broker (dating back to 1991). One of the most prominent is that sales typically slow down from late October through mid-December. This is reflected in recent data from the major auction companies and tracking firms. Auction company Adesa says September prices are down 2% from their peak in August (but still up over September of last year), and CNW Marketing Research says independent used car dealers sales were off 7% (an expected result with the end of Cash for Clunkers). Prices at Manheim—the world’s largest auction company—were still high in September, though they didn’t trend up like earlier in the year. Experts don’t expect them do stay down, either. There’s still a dearth of ex-rental ‘program’ vehicles, and the expected total of new car sales this year is off 25% or so, which means there are a lot less trade-ins out there. Personally, I find that interest gets strong again right about Christmas (maybe the same effect as what has people buying themselves gifts when they’re supposed to be shopping for others) and get really hot in January. That uptick in buyers, combined with the ...

Chrysler Financial announced recently that it’s getting back in the leasing business, after pulling out when the economy tanked last year.  And, while GMAC (who handled the leasing for GM brands) never completely quit the game, most of what they offered consumers was so ridiculous no one took them up on it—which was probably as intended. The simple fact is lease companies and divisions, which are supposed to look to the future, too frequently base everything on current conditions.  The biggest two factors in a lease’s payment—outside of the price of the vehicle itself—are the lease factor (equivalent to the interest rate on a loan), and the residual value.  That’s the crystal ball part of the equation, and millions are spend by companies like Automotive Lease Guide, and the manufacturers and banks themselves, to try to figure out what a particular car, truck, or SUV will be worth in three or four years. Giving them the benefit of the doubt, this economic crisis was so severe, no one really knew where we’d be as a country 36-months hence, or which companies might still be around!  But having seen this type of thing happen twice before in the eighteen years I’ve been brokering ...

When ten out of twelve recent used car transactions I did meant selling desirable vehicles above their NADA and Black Book numbers, I started to wonder: what is the use of these silly little guides? If they can't keep up with changes in the market, they become more of a hindrance than help. One of these deals was on a 2005 Audi S4 Cabrio with only 18,000 miles.  I had been helping a client try to buy one for about two weeks; every time we bid on one at auction, or on eBay, we missed—and not by a bit—often by several thousand dollars.  Finally, we found the one he wanted in the Hampdens, and had to pay over $33,000 for it—wholesale.  NADA (and the Black Book) valued it at only $26,150; Kelly at lease was closer to reality at $33,275.  But no bank or credit union (or the buyer’s lender, insurance company USAA) would use the higher number—meaning he had to come out-of-pocket thousands to buy his lovely blue convertible.  At least when people wonder why we in the trade use the auction reports more than the various bluebooks, I can now tell ‘em. Part of me wonders if this is an ...

I've touched on the price increases affecting used SUVs and trucks before. But things are reaching almost epic proportions here in mid-August, 2009. Wholesalers stand around at auctions shaking their heads at the insane prices they're paying-then raise their hands and push the bid even higher. When you see wholesale bids surpassing retail bluebook numbers by a thousand or more, though, you just gotta ask: how long can this continue? I wish I knew, for these numbers are (in the short term, anyway), unsustainable. Out of a dozen used cars, trucks, and SUVs I've sold to clients over the past 45 days, only two where at or below NADA bluebook. And I wasn't ripping peoples' heads off; my clients helped me pick and buy said vehicles, and my profit averaged just $500. Thankfully these folk all had good credit and either owned trades with equity or had cash to put down; otherwise neither bank nor credit union would have touched them. Once Cash for Clunkers runs out, prices may decrease, but in the meanwhile, it's tough sledding for all of us. These anecdotal stories are reflected in data from Manheim, the world's largest auction company (see chart); ...

It’s cliché that the dealership experience is fraught with innuendo, misrepresentations, and outright falsehood. To help understand why the game is played that way, put yourself into the white patent leather shoes of the typical salesman (or women, but for the sake of this example, let’s assume a male) at a dealership for a moment. He’s ‘on the floor’ five or six days a week for eight hours. If he’s working on a deal, he’ll often go home at 10 or 11 at night, and then show up the next morning to complete paperwork or take care of a trade-in. Working ‘bell to bell’ is incredibly fatiguing; the frustration level is compounded when times are slow and all he has to do most of the day is pace the lot. His compensation is commission-based at almost any dealer. Even if he has a salary, it’s minimal, and certainly not enough to sustain any sort of lifestyle. For him, it’s sell or die. When a prospect does show up, he knows the chance of them buying something from him are only 15-20% on that day. And, if he lets them walk, his close ratio ...

OVERVIEW AND POSITIVES The upsides of leasing are numerous. The average consumer keeps a new vehicle for about three and a half years (42 months). Since the average new auto loan is now 72 months, buyers almost never have any equity when they decide to trade in. They never own their vehicle—the lender does. This pretty much eliminates the most oft heard objection to leasing: “I don’t want to rent it—I want to own it,” since most people never truly do. Lease payments often run 25-35% lower than the purchase payment on the same vehicle. Why should someone pay an extra $100-200 per month when they’ll never ‘own’ it anyway? Aren’t there better things they can do with that money? Or, perhaps they can get a nicer car within the same budget. Beyond that is the simple fact that, though cars are more reliable than ever, when they do break it costs a lot more to fix them today than in the past. And if a lease is structured correctly, the lessee is always within warranty coverage, thereby limiting their out-of-pocket exposure. Beyond payment, other upsides to leasing are that one doesn’t have ...

Whether selling it yourself or trading it in, it’s to your distinct advantage to spend a bit to maximize what you’ll end up getting out of your soon to be ex-ride. Here are the steps to go through. Make sure obvious mechanical maladies are addressed, or that you know what the bill would be to fix them. An example would be a ‘check engine’ light. Any used car manager who sees one will assume the worst and discount the trade bid by a substantial amount—probably more than the actual repair cost. Yet if you’ve had it diagnosed, and have the receipt, he’s only likely to charge you that amount. If the tires are about gone, plan on putting on either cheaper new ones (unless your car is some high performance car, tread depth is more important than the name on the sidewall), or call around to one of the big tire store chains and get a set of ‘take offs’ or used tires that have over 50% of their life left. Dealers love to knock trades for tires. Another money saver, if you have a matching, full size spare, is to use its tire for ...