Normal
0
false
false
false
EN-US
X-NONE
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}

BANDON, Ore. — Whether it's through a lease or a loan
contract, CNW Research's latest findings showed captive finance companies hold a
strong loyalty position when it comes to keeping consumers driving an automaker's
brand — even after the deal culminates.

In fact, CNW determined captive lease programs continue to generate
the most loyalty.

"A tenet of many in the new-car business is that loyalty to
the brand can significantly impact profits by lowering marketing costs and
allowing the manufacturer to concentrate on bringing new business into the fold,"
CNW president Art Spinella explained.

"And, as the years of Lease Trak studies have shown, nothing
generates more return business than leasing," Spinella added.

CNW found the reasons for this loyalty range from a set time
to return the vehicle — which provides the dealer the opportunity to lease
another model to the same customer — to the manufacturer's direct-to-lessee
incentives that can be timed to the closing months of the contract.

Since the first Lease Trak study back in 1992 through now,
CNW indicated that it has tracked loyalty figures for leases from both captives
and non-captives and compared them to the conventional financing from captives
and non-captives.

Analysts discovered the most recent data shows strong return
business to the brand or at least the same corporation.

"In 1996, when leasing was in its heyday, nearly two-thirds
of all lessees returned to the same manufacturer for their next vehicle,"
Spinella recapped. "That has deteriorated somewhat in 2011 to about 55 percent.

"In follow-up interviews, the decline in 2011 can be traced
to a number of factors, depending on the manufacturer," he continued. "In GM's
case, for example, the closing of many dealerships and the loss of a few brands
hurt the loyalty figures.

"Toyota's situation was somewhat different: Stronger
competition from the likes of Ford and Hyundai," Spinella went on to say.

Regardless of the reasons, CNW emphasized the important
comparisons are against conventional financing through a bank, credit union or
other third party.

"While lease contracts from captives have a 55-percent
return rate, financing from a non-captive is under 25 percent," Spinella
shared.

"While leasing from the captive for a prestige brand, for
example, is nearly 63 percent, it is only 30 percent if the buyer finances through
a non-captive institution," he computed

Captive Finance Loyalty Also Strong

When a dealer has a customer sign a contract through a
captive finance arm, CNW determined nearly 42 percent will return to that brand
at the end of term or when the vehicle is retired.

Barely a quarter who finance through a non-captive do
likewise, according to analysts.

CNW found its studies show the reasons for this gap is the
automaker has a direct line to the buyer via the monthly payment.

"While a bank might promote home equity loans or refinancing
services or a new savings account option to the customer, automakers have a
more narrowed focus: The next best thing in vehicles – be it refreshed or
redesigned models, loyalty incentives, technological advances, etc. In a
nutshell: The ability to promote for another new car or truck," Spinella
explained.

What the Leasing and Loans Trends Mean

CNW acknowledged leasing is unlikely to reach the heights of
the late 1990s when more than a third of all new-vehicle acquisitions were
leases.

"But we're already seeing the beginnings of a lease war.
Virtually every manufacturer has a special promotion on this type of
acquisition," Spinella pointed out.

"While leasing is currently at about 24 to 26 percent, it
isn't likely to increase much over the next year or so," he continued.

"Subvented leases generated nearly $12 billion in losses for
the industry in 2001 alone because of overly aggressive programs including
unsupported residual value projections. But the upside is truly enticing,"
Spinella concluded.

Editor's Note: For more details on CNW Research's analysis
of floor traffic, used supply and more, watch for the upcoming edition of AR Today
produced by sister publication, Auto Remarketing.