COVID-19 Update: Monthly Lease Extensions Are Saving Customers & Dealers

By Desiree Homer

According to J.D. Power, estimates show that 1.8 million lease agreements are slated for expiration from March through July. That’s 1.8 million customers nationwide who would be visiting their local dealership this spring to turn in their keys and buy or lease a replacement vehicle. Now, with many states banning sales altogether, along with the shelter-in-place orders, dealers may miss out on that return business revenue. However, there are many dealers seeing customers take advantage of month to month lease extensions. And it may be just the solution to help bridge the gap between expiring leases and dealers retaining those customers.

Automakers and Lenders Responded Quickly

Of course, leases and contracts will vary by brand. Automakers and lenders reacted quickly and early on when the call centers clogged with questions about lease extensions. Many captives, like GM and Nissan, are offering monthly extensions, while Chase Auto is providing six-month lease extensions. Ford Credit has been granting more time to its customers by the thousands, according to vice president of U.S. marketing for Ford, Mark LaNeve. Auto organizations are also joining in the support efforts to push for states to ease up on essential business requirements. Be watching for state by state approvals for digital and remote/delivery services that might allow you to take advantage of selling to these expiring leases safely. For example, in a recent podcast with Dave Cantin, the president of the California New Car Dealers Association (CNCDA), Brian Maas, talks about state-level appropriations and efforts there, easing sales restrictions.

Off Lease Customers Are Big Business

Retaining these customers is critical for revenue at the dealership level. Leasing numbers, as expected, fell in March due to COVID-19 mitigation efforts. Automakers began launching new incentives for buying, including zero-percent financing and payment deferments. Interest in leasing has significantly cooled as a result. With unemployment at an all-time high, some lease customers are finding themselves without a job or with a reduced income, forcing them to opt-out of their leases. Dealers are reporting that some customers are just dropping off their vehicles. Dealers now unable to sell to these off-lease customers, will likely be missing out on revenue.

Lease Extensions Are Proving to be the Lifeline

Because both consumers and dealers understand that the economic landscape today is imposed and temporary, those who can wait are choosing to do so. Many expiring lease customers are opting to request the lease extensions, not to avoid a next purchasing step, but instead to postpone it. Providing an additional choice is allowing many of those potential customers to remain in the pipeline. It’s a lifeline that once restrictions are lifted, can be lucrative for dealers as those expired lease customers will be ready to move forward with their next vehicle. Of course, not all of those vehicles will make it back to their original dealerships. However, they won’t be extinct from inventory altogether.

If your brand has lease extension options, making those available to your lease customers who may have expiring contracts over the next few months is critical. You can keep the communication channel open, so when they are ready and able to make their purchasing or follow-up lease decision, they’ll come to your store to do so. Identify your potential customers in this segment and be sure to email, call, or engage them on social media. Remind them of their possible lease extension options, and keep them connected to come back when the Coronavirus mitigation efforts are lifted.