Car leasing business model
Discussion
Given that some cars seem surprisingly cheap to lease and that the monthly payments and deposit appear to just about cover depreciation, it has me wondering in a fairly rambling way...
Do the leasing companies buy the cars extremely cheaply?
Where do all of the former lease cars go to? They must rely on a large proportion of people buying used cars.
...but, If leasing some cars, eg. Juke, can be so cheap, few people will want to buy a nearly new, so surely the used values of a nearly-new former lease car must be rock bottom? If so, How do the leasing companies make money? Will the system grind to a halt?
FWIW, I prefer owning a car and answering to nobody if I scratch it or change something.
Do the leasing companies buy the cars extremely cheaply?
Where do all of the former lease cars go to? They must rely on a large proportion of people buying used cars.
...but, If leasing some cars, eg. Juke, can be so cheap, few people will want to buy a nearly new, so surely the used values of a nearly-new former lease car must be rock bottom? If so, How do the leasing companies make money? Will the system grind to a halt?
FWIW, I prefer owning a car and answering to nobody if I scratch it or change something.
Edited by MC Bodge on Wednesday 24th September 19:44
okie592 said:
Ex lease cars go to auction
It's like anything, buy in bulk and the cost will be less than buying 1. Applys to anything
Exactly this. Or they go to trade wholesalers who then sell onto franchised dealers who put them on the pitch at retail money. Big dealerships buy them in 10/20 at a time. It's like anything, buy in bulk and the cost will be less than buying 1. Applys to anything
It's always less disirable models too, who was the last person to buy a Toyota avenses privately? Toyota will sell them
Dirt cheap to sell units. All the ones I see are leased
Or taxis. Same with a insignia although I imagen there are private ones too. I don't Remeber the last te
I saw a enterprise car that wasn't a Astra corsa or insigina
Dirt cheap to sell units. All the ones I see are leased
Or taxis. Same with a insignia although I imagen there are private ones too. I don't Remeber the last te
I saw a enterprise car that wasn't a Astra corsa or insigina
okie592 said:
It's always less disirable models too, who was the last person to buy a Toyota avenses privately? Toyota will sell them
Dirt cheap to sell units. All the ones I see are leased
Or taxis. Same with a insignia although I imagen there are private ones too. I don't Remeber the last te
I saw a enterprise car that wasn't a Astra corsa or insigina
I tried to do a deal with one of the big rental companies on golfs and polos, they wanted our margin as well as all of the discount but we got the buy backs for stock, I don't think so, those cars would have been fDirt cheap to sell units. All the ones I see are leased
Or taxis. Same with a insignia although I imagen there are private ones too. I don't Remeber the last te
I saw a enterprise car that wasn't a Astra corsa or insigina
ked.I think i can answer. In the 80`s and 90`s the discount offered was 30% or so depending on which companys ( easy to work out by what was the most popular ) wheres speaking to someone i know who owns a leasing firm just last week ( major national franchise owned with multi million pound turnover ) he stated its presently at 50% retail.
This mean a car brought for say 10K with a retail at 20K will still be worth as much as it cost in the open market after 2 years . The lease or rental is 100% profit all the way
This mean a car brought for say 10K with a retail at 20K will still be worth as much as it cost in the open market after 2 years . The lease or rental is 100% profit all the way
I suspect lease fleets buy so many standard-spec car that they give manufacturers the volume necessary to keep production lines turning over while the real profit comes from private buyers paying more and spec-ing up their cars. It's probably not a business model that is sustainable in the very long term from the manufacturer's point of view as it does ultimately reduce their products to commodity status.
It's more to do with manufacturers giving lease companies discounted stock than lease companies getting great deals.
The list price for an Audi or BMW or Merc with a 3.0 diesel may be £10k more than the base diesel but the true cost may be a fraction of this so the list price is irrelevant and discounts made.
Leasing companies do not make huge profits per deal but make huge profits on mass.
Not all leasing stock is sent to auction, many lease companies have their own retail outlets either a jv with a car supermarket, direct mailing lists to staff or their own garage.
They can lose money on individual deals, a simple example would be if someone leased a 4x4 and used it for commercial purposes, lots more wear and tear than expected, if many parts failed and or additional TYRES etc means they lose. Also vehicle returned in very poor condition and customer correctly argues its fair wear and tear, this all adds to a loss.
The list price for an Audi or BMW or Merc with a 3.0 diesel may be £10k more than the base diesel but the true cost may be a fraction of this so the list price is irrelevant and discounts made.
Leasing companies do not make huge profits per deal but make huge profits on mass.
Not all leasing stock is sent to auction, many lease companies have their own retail outlets either a jv with a car supermarket, direct mailing lists to staff or their own garage.
They can lose money on individual deals, a simple example would be if someone leased a 4x4 and used it for commercial purposes, lots more wear and tear than expected, if many parts failed and or additional TYRES etc means they lose. Also vehicle returned in very poor condition and customer correctly argues its fair wear and tear, this all adds to a loss.
Yes, as NCT001 says, the cheapest deals are generally stock. That is, quite often, vehicles that have been pre-registered to meet sales targets, which are then offloaded into the leasing market, which I guess helps with nearly new residual values as there isn't a glut of pre-reg's hitting the used market and driving down prices or affecting new car prices.
For cars that are built to order, which is most of them, the leasing prices are not nearly so cheap, although the finance houses still get big discounts compared to us individuals.
For cars that are built to order, which is most of them, the leasing prices are not nearly so cheap, although the finance houses still get big discounts compared to us individuals.
Yep, they buy at a significantly lower price. IMO the current pricing of vehicles is deliberately overinflated to factor this in and any supposed discount they may give to jo blogs buying. Companies are more than happy if we lease as they also have full control over the nearly new market too this way.
You only have to look at the motor companies that have recently been prosecuted in China for price rigging.
Have a look at a like for like model from 2007 and factor inflation in to whats retail is now. On the whole they've soared way above....just saying.
You only have to look at the motor companies that have recently been prosecuted in China for price rigging.
Have a look at a like for like model from 2007 and factor inflation in to whats retail is now. On the whole they've soared way above....just saying.
The main leasing companies aim to achieve around £1,500 - £1,800 profit per vehicle that is leased out. Broker commissions can vary quite wildly depending on what rate they sell the deal for. Discount vary massively from mfr to mfr - the likes of Ford / Vauxhall / Nissan (bread and butter volume cars) giving the largest discounts. Most manufacturers, but not all, have agreed larger discount terms with fleet buyers than individuals, but not all - the likes of Porsche / Lotus have lower volumes so don't tend to offer fleet discounts as such.
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