Volvo Car Financial Services is looking to grow its lease penetration to deliver more “lightly used vehicles” to its dealer partners, the captive’s President Tony Nicolosi told Auto Finance News.
Historically, Volvo Car Financial Services embarked on a “restart” in 2012 after the parent manufacturing company was sold by Ford Motors in 2010. After the initial sale, lease penetration was at 10% which has continued to impact the volume of off-lease vehicles coming back to dealers, Nicolosi explained.
“We’re in a different cycle than other manufacturers, we’re just starting to grow sales again, and we’re also getting our lease penetration back to where a normal luxury captive finance company should be,” he said. “It’s the opposite for us, we actually don’t have enough lease returns, our dealers are hungry for high-quality used cars and we have a very low number [of off-lease returns] in 2017, but next year it will climb up.”
By 2019 the captive should be back to a “normal cycle of used cars,” spurred by a 20% sales increase in 2015, and another 18% rise in 2016, he added.
The captive is also focused on making sure those vehicles come back to their dealer partners — rather than the auctions — once the volume does pickup, Nicolosi said. By using an upstream lot and online store program, through which the originating dealer gets the first shot at buying the car, the captive has pushed its dealer buy-back rate to 96%.
“Only 4% is going out to auction, which is nothing — that shows you the demand the dealers have for the cars,” he said. “Right now we’re a different stock than most of the other manufacturers. We don’t have a problem with off lease cars and, in fact, our dealers could use more.”