An investment advisor disappointed by his lease-end negotiation process with Porsche Financial Services has created a web site to help consumers in similar situations.
Michael Corcelli launched GetYourCarBack.com to offer auction and pricing information to consumers whose leases are expiring.
Here’s how it works: You return your car at lease-end. For $100, you can use the site to track down the location and time your car will be auctioned. For another $1,000, you can hire an auction rep to buy the car back for you.
The rationale is that consumers will pay less for their vehicles at auction than they would if they paid the pre-set residual value.
Part of the reason financing isn’t booming the way auto sales are in China is that the customers and credit attitudes are just different from those in other countries. Until 1987, there were essentially no credit cards in China, and the government has fostered a saver’s culture for decades. So people tend to buy outright or put down the vast majority of the purchase price.
Younger people are warming to more “conventional” financing arrangements like we have here, but the majority of buyers still don’t want to owe on a car. Or anything else. Debt has a certain social stigma that it doesn’t necessarily have here. Cash purchasing also often means a discount, the inverse of financing, which equates to paying more over the long term.
Because of the relatively recent mass adoption of easy credit, many buyers also lack a qualitative credit history.
Then there are the cars that most people can afford. Better off buyers can purchase western cars or western cars made in China – Citroens, Buicks, etc. But most buyers are buying Chinese-made cars, which are cheap to buy out of savings but may or may not hold up long term – I certainly wouldn’t want to enter into a 72-month term on some old Isuzu Rodeo or Daihatsu Charade clone.
But – the time to get firmly established is now. Because eventually, with consumer culture raging in China, people will develop credit histories and they will relax their attitudes about borrowing on big-ticket items like cars.
Thanks for the clarification, Chuck. Sorry for the error.
In my experience there is a huge difference in the number of lessees who actually buy their off lease vehicles when comparing dealers and independent lease companies/facilitators.
The more sophisticated lessees are fully aware that if they DO try to buy out their vehicle the lessor will probably try to charge them a lot more than market value. This leaves the door open for a site like this one. If the guy can buy a list of lessees and pitch them on his service during their lease he might generate some interest.
Chuck, when you were with MBCC and faced with a large gap between the residual and current market value, did you have the flexibility negotiate lower buy outs with lessees at lease end?
I suspect not. However, a site like GetYourCarBack may very well make that a reality soon.
We actually do get lease end customers asking how they can either negotiate with the lessor or if we can help them buy it. Most of the time we simply make the current payoff and sell it to a buyer the lessee has found to avoid double tax. I don’t see this as a volume service and I agree with Jeff about the upstream potential of the vehicle being sold prior to auction.
Great discussion. I believe this is a short-lived business concept, the lifespan of which can be timed with an egg timer. It appears to be a business that will create a quick buck then fade quickly.
Currently lessees wish to retain their vehicles at lease-end pay residual value or negotiate with the lessor. Others sell at auction. There is nothing sinister about the process, just the nature of the beast…some will buy vehicles at lease end and some will not. If the system is upset to any significant degree and lessors begin to take more significant losses due to sites like getyourcarback, residuals will be lowered or processes will be modified to preclude dealers/wholesalers/auctions from selling the vheicle to the original lessee.
This model will increase leasing company losses, ensuring all vehicles must be depreicated to true wholesale values rather than utilizing aggressive residuals on hot cars/trucks. Long term effects will drive residuals lower and increase payments, completely closing the door on this business model at its very foundation.
That said, the financial advisor will make a quick buck upsetting the system up in the meantime.
Jeff – We actually did get to the point of allowing MBCC customers to buy their cars for less than RV. We also offered below market interest rates for used vehicle financing which enabled us to offset a portion of the ‘premium’ we were asking customers to pay.
I’m not sure if those practice are still in place today.