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Customer LoginsAutomotive leasing: The Swiss Army Knife of retailing
Although leasing is frequently used as a tool to attract mainstream buyers to upscale vehicles they otherwise would not be able to afford, leasing can also be used effectively in other situations. The table below lists the twenty models with the highest retail lease penetration during the third quarter of 2015, and this list suggests other circumstances in which manufacturers and finance sources currently are utilizing leasing to energize the marketplace.
Three of the "Top Twenty" models face unique challenges in today's retail environment. The smart Fortwo, with a wheelbase just over six feet (one of the shortest in the industry, if not the shortest), obviously faces headwinds in today's $2 per gallon (or less) landscape in the U.S., and moderate monthly lease payments make it possible to avoid dealing with the challenging cost/benefit analysis of a purchase.
The Kia K900 is positioned, based on size and content and powertrain, to compete with the large luxury sedans, but that is a tall order given Kia's mainstream and value-oriented image. Kia addresses this challenge by offering attractive lease payments below those of the established luxury fullsize sedans; the K900 leasing option also will attract buyers who would not be able to afford the retail purchase price.
With the Maserati Ghibli, Maserati is almost doing the opposite of Kia. The Ghibli gives Maserati a presence in the luxury midsize sedan category, a segment "below" those which Maserati is accustomed to competing in. This segment includes such established entries as the Mercedes-Benz E-Class, BMW 5-Series, and Audi A6, among others. On a pure retail price basis, though, the Ghibli is positioned above these cars, so Maserati overcomes this hurdle by offering attractive lease payments that approach those of the German vehicles. Since Ghibli makes up the vast majority of U.S. Maserati deliveries (70% September 2015 CYTD), maintaining Ghibli's volume is a core strategy for the brand.
Five of the twenty listed models are either EVs or hybrids, and it is likely that demand for these alternative power vehicles is being hurt by low fuel prices; low monthly lease payments are a means by which to lower short-term costs and, again, increase demand.
Manufacturers also use leasing to strengthen new product introductions. This fall, BMW launched the all-new 2016 BMW 7-Series, and to raise this model's share of the large premium sedan segment, which recently has been dominated by the Mercedes S-Class, BMW is relying on competitive lease payments.
Finally, yes, leasing is still a wildly popular means to attract non-luxury drivers to luxury brands. Two "gateway" segments at the lower end of the luxury space, the luxury compact and luxury sub-compact sedan segments, currently have retail lease penetration of 67% and 63%, respectively. Eight of the twenty models on the nearby table fall into one of these "gateway" categories.
Tom Libby is Manager, Loyalty Solutions and Industry Analysis, IHS Automotive
Posted December 4, 2015