For the sixth straight year, auto leasing gained in popularity among consumers.* Lenders and dealers have capitalized on the popularity of leasing by extending millions of contracts to consumers over the last few years. As momentum for new cars trend upward, leasing continues to shift forward, portfolios grow and a staggering 3.5 million leases set to mature* lenders can no longer rely on manually grounding vehicles and end-of-term management. It is an unsustainable, inefficient task.
In an ideal scenario as the lease term nears its end, an engaged dealer will assist the consumer with new vehicle purchase or lease, discuss options for the existing vehicle (which may include new financing for the existing vehicle), explain the potential liability, and try to bridge the gap between keeping the consumer happy while maintaining the value of the used vehicle.
If vehicles are returned to the dealer, it is important lenders be notified in a timely manner of the vehicles’ location, recorded mileage, and any notable details about the condition of the returned asset to begin the grounding process. Prior to the leasing ‘boom,’ performing these vehicle notifications manually, via fax, telephone or email was manageable.
With today’s market volume, if a lender does not receive and process these manual notifications in a timely manner they risk:
- Having their assets lost, damaged or stolen
- Customers angry and confused about unwarranted collection calls,
- Carrying costs of a large amount of vehicle inventory on their books.
To manage the millions of maturing leases and future demand, lenders now more than ever need to rely on their servicing systems to automate these end of term tasks, which, historically, were done manually and error prone. There are many benefits of workflow automation and vendor integrations, such as:
Realize lease maturity management efficiencies– If a dealer is able to send an electronic notification via service file direct to the lender’s servicing system, lender agents can spend their time managing the exceptions rather than entering each incoming (paper) file one by one. This reduces error, helps manage the inevitable volume, and reallocates resources to more high value tasks for the business. Such tasks could include coaching lessors through the process, explaining why they will receive a call from an inspection company or when they are required to return the vehicle.
Help maintain client satisfaction– One sure fire way to disappoint your consumer is to send a bill for a vehicle they have already turned back in to the dealer. Additionally, you avoid unnecessary outbound collection calls or adverse credit bureau reporting that damages relationships further. An automated system records the data in real-time, minimizing the chance for error.
Improve dealer relationships –Lenders who decrease the time it takes to remove unwanted vehicles from dealer lots stay in their good favor and will continue being leveraged for additional consumer financing. Beyond a desire to avoid asset liability, dealers simply don’t have the real estate to store large inventories of lease returns for vehicles they chose not to purchase for resale. By automating the grounding process with the dealer, lenders can protect their assets and relationships.
Maintain or even increase return – Every dollar counts remarketing used vehicles. Lenders may miss an opportunity to have vehicles moved to the appropriate channel for a quick and profitable resale if the grounding is even delayed a few days.
Reduce transportation issues – If there is confidence that the dealer has provided the proper vehicle information during the grounding process by performing electronic notifications, it reduces dry run charges and transportation issues with vehicles grounded incorrectly.
It is unclear and often hard to predict when leasing volumes will spike. What is clear is there is volume to manage today. Lenders who are not in a position to transition to a servicing system that provides rules-based queuing and system triggered letter processing, vehicle inspection and grounding functions have options. Business process outsourcing services can perform these end-of-term activities on behalf of the lender with the right staffing and automation, while maintaining the integrations with industry service partners, so they can focus on the taking the business to higher and more profitable grounds.
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