During downturn, retaining lease customers a top issue for dealers, lenders

TROY, Mich. – 

As dealers and lenders navigate a constricting market and economic downturn, retaining lease customers is extremely important for those dealers’ and lenders’ profitability, says J.D. Power director of automotive finance intelligence Patrick Roosenberg.

“Communication through customer-preferred channels is paramount as dealerships temporarily close and lease customers navigate an unprecedented event, uncertain of their available options to defer payments, extend or terminate their leases,” Roosenberg said in a news release.

Retaining lease customers as the market heads into a downturn is a main theme of the J.D. Power 2020 U.S. End of Lease Satisfaction Study, released on Thursday.

J.D. Power notes that new-vehicle leases accounted for 31% of the new retail vehicle market in 2019. Lease transactions this year account for 52% of captive lenders’ new retail business, the company reported.

Improving lease retention rates

A look at those percentages shows the importance of dealers and lenders working together to retain lease customers as the market heads into a downturn, J.D. Power said.

The study, fielded from November 2019 through January, identifies lease-end practices and timely marketing opportunities that optimize lease retention for the same brand and at the same dealer. The study is based on responses from 2,848 mass market and luxury vehicle lease customers who are within six months of lease end.

The study shows that effective communication and marketing efforts that factor in important decision-making timeframes can play a strong role in improving lease retention rates.

Roosenberg said the market will recover and competition from banks and captive lenders will be strong for the 1.8 million returning lease customers who are scheduled to turn in their vehicles in the next five months.

“Aggressive retail programs, some of which have already launched with 0% financing and deferred payments up to 120 days on extended term loans, will create more obstacles for lease retention,” Roosenberg said.

Key findings

J.D. Power said one key finding of the 2020 study is that first-time lessees are less loyal to leasing than returning lessees.

Elaborating on that, J.D. Power said 53% of first-time lessees in the mass market segment indicate they leased another vehicle, and 58% of those returned to the same brand.

Sixty-eight percent of returning lessees say they leased again. For the highest-scoring lender in the mass market segment, 79% of first-time lessees leased again with the same brand.

“Understanding the different lease-end journeys is crucial to recapturing lease customers in both the luxury and mass market segments,” J.D. Power wrote.

Another key finding of the 2020 study: Customer satisfaction is key to retention.

J.D. Power notes that the average overall satisfaction score among returning mass-market lease customers who leased again with the same brand is 862 on a 1,000-point scale.

However, overall satisfaction among returning mass market lease customers who switched to a different brand is just 778. J.D. Power says that trend shows even more in the luxury segment. For that segment, overall satisfaction among brand loyal lessees is 876. For non-brand loyal lessees it is 795.

Another key finding of the 2020 study involves “moments of truth”: Specific timeframes, communication channels and identified actions taken during important moments in the lease process can set the tone for the entire experience, J.D. Power said.

Addressing the mass market segment, J.D. Power said the greatest differentiation of lease satisfaction among those that leased again are ease of inspection process, ease of scheduling vehicle return, ease of turning in vehicle, and ease of lease termination.

Addressing the luxury segment, the company said ease of lease termination; ease of turning in vehicle; and ease of obtaining details about lease end are the greatest differentiation of lease satisfaction among those that leased again.

An additional key finding of the study is that buyers are beginning the consideration process sooner.

Elaborating on that, J.D. Power said that when it last conducted the U.S. End of Lease Study in 2017, only 3% of customers began to think about their next vehicle more than 12 months before the end of their lease. In 2020, that percentage has risen to 14%.

“Understanding and executing on the next steps drawn out in the study are key to securing retention,” Roosenberg said.

Another key finding of the study is that more customers are researching options. Lease customers are conducting their own research and due diligence by visiting dealership, OEM and provider websites.

“Lenders and OEMs must quickly move to assure their websites provide the actionable information lease customers are seeking,” J.D. Power wrote.

The company added that because lease customers have identified the specific information they’re looking for at the end of their lease, that provides lenders with important feedback about their websites.

Ally, Chrysler Capital, Ford Credit, GM Financial, Honda Financial Services, Hyundai Motor Finance, Kia Motors Finance, Mazda Capital Services, MINI Financial Services, NMAC, SE Toyota, Subaru Motors Finance, Toyota Financial Services, US Bank and VW Credit are the mass-market lenders included in the study.

Luxury lenders included in the study are Acura Financial Services, Audi Financial Services, BMW Financial Services, GM Financial, Infiniti Financial Services, Jaguar Land Rover Financial Group, Lexus Financial Services, Lincoln Automotive Financial Services, Mercedes-Benz Financial Services, Porsche Financial Services, US Bank and Volvo Car Financial Services.

To request more information, see the full 2020 U.S. End of Lease Satisfaction Study.

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