Toyota to Offer Pre-Owned Leasing; Sensible Dreamers Rejoice
A wave of older vehicles is poised to flood Toyota dealer lots, but the automaker is confident it has just the plan to deal with it — pre-owned leasing.
Toyota is certain that adding a leasing option to its certified pre-owned inventory would boost CPO sales and clear lots in the face of a growing compliment of three-year-old product, Automotive News reports.
The plan has already been quietly rolled out in the U.S. Northeast, but a national strategy should be in place by the end of April, dependent on training in each dealer region. The option would allow a reduced commitment for buyers who don’t want to finance the full cost of a pre-owned vehicle.
“We’ve got a record number of off-lease returns this year — about 275,000 — and I think the industry also does,” stated Toyota Division general manager Bill Fay. “It’s important for all of the industry to have a plan to absorb those lease returns and have a good process to reintegrate them back into the marketplace.”
The move towards leasing, which is supported by the automaker’s financial services division, would push CPO sales up eight percent in the U.S. to a total of about 400,000 vehicles this year.
Eligible vehicles must be no older than three years and have less than 65,000 miles on the odometer. Lexus products aren’t included in the CPO leasing plan.
Toyota sales, which sank to less than 1.4 million in the U.S. in the wake of the recession, rose to nearly 2.1 million in 2015. Not surprisingly, the amount of car buyers opting to lease also rose post-recession, especially for those purchasing subcompact, compact and crossover vehicles.
[Sources: GoodCarBadCar, Edmunds]
Pre-owned leasing tells me that they over-valued the trade-in value of the car from the original lease and don't want to lose that money. It tells me that the Camry specifically isn't as popular a car as it used to be WITHOUT the benefit of those low leasing rates. It's no more now than a long-term rental and has no better aftermarket value than any other rental from the popular rental agencies.
In an environment of increased reliability I'm consistently amazed by how prevalent leases or extended payment plans have become. I would think that a lease on a used car from Toyota would be the most antithetical offering a company could make, but then I also realize a disturbing number of people are comfortable enough to have elevated a billionaire reality tv star to potentially become the leader of the free world. So in that light, this makes perfect sense. I'm probably getting to be an old man faster than previously thought.
New car "sales" after the Great Recession peaked in fall 2015 - and a record number of them were leases, mostly for three years. That means 2018 will be prime time for buying a CPO vehicle according to my calculations.
For fun I ran some figures on this using a 2015 Camry w/ 29k miles I found on TrueCar for 17,889. To come up a with a residual, I searched 2011 Camry and came up with one with 76k miles and a retail price of 12, 491 for fun we need to 'assume' the selling dealer has $1500 profit in the 2011 so call it a W/S cost of $10,991 after reconditioning new tires and such. So, let's work a lease shall we? 10,991 / 17,889 = .62 (residual percent or 38% depreciation) 17,889 * 62% = 11,091 17,889 - 11,091= 6798 (depreciation) 6798 / 36 (assume a 3 yr lease) = $188.84 Now for the Vig: Let's use a .0015 money factor or 3.5% (it is a used car, so the rate will be higher than for new I would presume) (17889 + 11,091) * .0015 = 43.47 (monthly interest) Finally sales tax, in my area it is 8.25% 188.43 * 8.25% = 15.55 The total monthly payment on a 3 year lease would be 188.43 + 43.47 + 15.55 = $247.45 with no money out of pocket Now, this does not figure an acquisition fee, disposition fee, dealer handling or any sort of extended warranty. Figure the warranty would run $30 a month best case. So, for some this will be a decent deal I suppose. About $50 to $60 less than a 60 month purchase and $40 or so less than 72 month purchase. Again with no money down. Less payment and they can walk from it in three years.