WITH used car leasing still lagging the conventional new car leasing market in terms of penetration, this evolving segment appears ripe for delivering meaningful growth to brokers over the coming years.
Online portals run by leasing names such as Hippo Leasing and Green Apple Leasing are competing vigorously in the used car leasing market alongside mainstream players such as Arval.
There are other players such as Grace Automotive is looking for motivated leasing brokers to promote nearly-new vans alongside their existing brand-new offer.
Auto dealership software firm Dealerweb has highlighted the significant potential for used car leasing to grab market share.
“Used car operations continue to provide a valuable profit centre. An attractive, used car finance rate that can deliver a low monthly payment will generate more clicks and inquiries, and ultimately, more sales,” said Dealerweb in a report earlier this year.
This seems an important observation given the broader trend for consumers to increasingly transact online.
According to Dealerweb, used cars accounted for 45% of the leasing market versus 75% for new cars in May.
Consumers shopping online tend to focus sharply on relative value and cost. Offering leasing deals on cars of up to four years old tends to produce some attractive deals for consumers. Price should also be especially important for consumers this year given the wider economic slowdown currently being witnessed across both the UK and globally.
Vehicle leasing company Arval, which is owned by France-based financial services group BNP Paribas, last year launched its Re-Lease product in the UK, claiming to be able to offer used cars on a leasing basis for 20% cheaper than an equivalent, new model.
The used vehicles it is offering are taken from its own fleet, are less than 30 months old and come with mileage below 30,000 miles. Arval’s leases come at 12 and 24 months, with mileage options in the range of 5,000 to 25,000 per annum, with 1, 3, 6 or 9 monthly upfront payments. It offers access to cars from big brands under the product, including the likes of Audi, Ford, BMW, Honda, Jaguar, Mercedes, Nissan and Volkswagen. Prices start from around £96 per month plus VAT.
Arval points to improved durability in the current crop of contemporary vehicles in the used car market, claiming vehicles that are less than 30 months old are often difficult to distinguish from brand new ones.
It has been careful, however, to manage expectations around choice, flagging that prospective customers may not be able to get the exact model, colour and spec that they wish for. For this reason, used car leasing is unlikely to become the default acquisition policy for major fleets.
Nevertheless, leasing companies such as Arval increasingly see the used car leasing option as appealing to smaller business and individuals.
While a stagnant, Brexit-restrained UK economy means many individuals and smaller businesses may be prepared to compromise a little on choice so they can scoop up attractive deals, there is a flipside.
A worsening economic outlook tends to make leasing companies a little nervous about used car values. While an extreme example, the savage global recession of 2008-2009 brought an abrupt fall in used car prices.
Sceptics of the used car leasing model tend to point to the difficulties posed for leasing companies in accurately forecasting the depreciation of a used car versus a new one.
However, in the UK at least, used-car leasing looks set to remain a secular growth story, albeit one that is heavily focused around smaller businesses and individuals.
Given the increasing prevalence of online shopping more generally, portals offering UK consumers access to good value, nearly new cars, on reasonable leasing terms, should be able to look forward to robust long-term growth.
