While the automotive industry has encountered numerous disruptions in recent years, the current market is presenting entirely new challenges and opportunities for auto dealers.
As inventory shortages linger on, customers returning to the market are finding few options on the lot and historically high prices. Customers approaching the end of their lease are being hit especially hard and faced with rising lease costs and sky-high equity in vehicles, resulting in increased lease buyouts.
According to NADA’s annual report, consumer leasing of new vehicles has dropped 6.5% in the last two years – from 30.3% in Q4 2019 to 23.8% in Q4 2021.
As soon as a customer buys out their lease, their loyalty is immediately at risk, threatening sales and service revenue, pre-owned inventory and more. Proactively and consistently engaging lease customers is key to preventing buybacks – and customer defection.
In this blog post, we’ll share steps for auto dealers to proactively prevent car lease buybacks in 2022 including:
· Setting clear end-of-term expectations early
· Staying in consistent contact with your customers
Set clear expectations early
While auto dealers have been well aware of inventory shortages, for customers returning to market, fewer options and increased prices may come as a surprise.
According to NADA, the average retail selling price of new vehicles increased from $38,961 in 2020 to $42,379 in 2021, driven largely by ongoing inventory challenges. At the same time, trade-in values are also rising with the average equity for new car buyers up by 81.3% in March 2022 from a year ago.
Setting clear expectations with customers before their lease expires is key to preventing sticker shock on the lot. This also maintains loyalty as customers are discovering higher equity in their vehicles and are increasingly being advised to buy out their lease.
Look for opportunities to engage lease customers earlier in their journey – in some cases up to 12 months before their lease expires – with well-timed and useful information personalized to them, including relevant details about their current vehicle.
During these early engagements, your team should prioritize customer satisfaction, gauging any concerns customers may have with their lease and seeking out appropriate solutions. At this stage, begin inquiring on your customer’s future purchasing plans: –
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Dealership Templates for Customer Communication Amid Inventory Shortages
Rather than shying away from things like price and payment, set the stage for a positive customer experience by discussing the available current, and projected, rates and availability for possible vehicles that match their needs. In a 2021 study, car buyers ranked trust as important as the price of the vehicle when deciding which dealership to buy from – with the quality of the communications from the dealership coming in at a close third.
Stay in consistent contact with your customers
Customers aren’t just buying back their leases and driving away – they’re oftentimes leveraging that equity at competing dealerships or brand to trade-in and acquire the new vehicle they want. This defection poses significant immediate and future challenges to customer loyalty rates, which have already hit a six-year low last summer.
The best defense against competitor’s conquest attempts in today’s hyper-competitive market is consistent customer communication – at every step. Comprehensive data is key to this process, enabling dealers to confidently engage lease customers with relevant and personalized messaging appropriate for their stage in their journey.
Predictive Marketing for Dealerships 101
It’s important at this stage to once again set clear expectations and begin to explore options such as pre-orders or reserved sales, especially as many brands are experiencing delivery delays. Every message should build off the last and help emphasize the critical importance of building out a personalized lease-end plan to meet their unique wants and needs.
Explore every option
As previously mentioned, as soon as a customer buys out their lease, their loyalty is immediately at risk. This doesn’t just threaten a dealer’s sales figures, it ultimately impacts their ongoing service revenue, pre-owned inventory and more.
As a customer lease expires, your entire dealership’s goal needs to be retaining their business – at whatever cost.
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3-Step Guide for Dealership F&I Success Amid Inventory Shortages
While dwindling OEM incentives and tight new vehicle inventories are pushing some dealers to put off engaging their lease customers, increased competition and sky-high equity is emphasizing why it’s so important dealers stay in consistent communication with their audience.
Today, not engaging your customers – especially as they approach the end of their lease – could mean losing them for good. Proactively engaging customers to create a personalized end-of-lease action plan is key to preventing lease buybacks, maintaining future loyalty and maximizing dealership success.