BANDON, Ore. -

The trend of consumers keeping their vehicles longer that began during the last recession is only expected to accelerate in the next five years, according to CNW Research president Art Spinella, who pinpointed the lease market as a vital tool for automakers and dealers in keeping customers coming back to the dealership.

This is particularly paramount to the certified pre-owned market, in which later-model vehicles are the lifeblood.

In a recent Purchase Path video presentation shared with the media, Spinella explained a timeline dissecting changes in vehicles disposal over the last couple decades.

Back in 1990, he said, a little more than a third (36.25 percent) exited their vehicle within one to five years of purchase, according to the presentation, titled  “Purchase Path 2014: A New World.”

From 1999 until about 2008 or 2009, he explained, the proportion of consumers who exited after one to five years and the percent who held on to their vehicles six years or more were relatively close (“parity,” as Spinella described it).

And then, the market changed.

“What we started to see was, people started keeping their vehicles longer. The trend upward was mostly in keeping their vehicles six years or more,” Spinella said. “We’re expecting that over the coming five years, that figure is going to increase even more. The impact on certified pre-owned and the necessity for leasing comes into play here.

“Leasing, especially with a short-term lease,” he added, referring to leases in the 24- to 42-month ballpark, “at least brings the customer back to market sooner than that person would have otherwise.

“This becomes even more so as people who buy their vehicles keep them longer.  And the tendency is to do exactly that across the board,” Spinella continued. “By having people in a lease, you pretty much have guaranteed that person is going to return for a vehicle before they would otherwise.”

Put another way, putting a consumer in a short-term lease can, to a degree, help “blunt the trend” of longer ownership periods, as the shopper is encouraged to return to the store.

“Dealers have clearly seen, however, the advantages of certified pre-owned — and this is also a case of doing what is financially logical for both the dealer and the manufacturer,” Spinella noted.

“Obviously from the manufacturer’s side, it’s having a customer come back and selling another vehicle or producing another vehicle,” he continued. “From the dealer’s side, it’s a way of offsetting some of the tighter financial constraints of lower profit vehicles on the new-car side, by having a strong certified pre-owned market.”

Based on the statistics provided by CNW, automakers and dealers have clearly taken note.

The company provided an end-of-lease action chart comparing, brand by brand, the percent of vehicles coming off lease that were retained by the dealership in 2005 against the proportion retained in 2013.

A significant majority of the brands included in CNW’s data showed increases between 2005 and 2013, many of them by double-digit percentages.

Such an example provided by Spinella was the Ford division. In 2005, 17.5 percent of vehicles coming off lease were retained by the dealer. In 2013, that number jumped to 31.4 percent.

Similarly, Kia climbed from 11.9 percent off-lease retention by dealer in 2005 to 23.4 percent this year.

“Why is that important? Because all of these vehicles that are retained by the dealer, a vast majority of them go into certified,” Spinella emphasized. “And if they are in fact certified, they are pulling in, on average, from $2,200 to $2,500 more transaction price than a comparable vehicle that is not certified.”
 

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.