Why Dealers Like Leases

Some automotive consumers believe that car dealers prefer to have customers lease because he makes more money on leases than loans.

That can actually be true if the customer is uninformed about leasing and the dealer is able to manipulate the lease deal to his advantage. However, if the customer understands leasing and how it works, there is no fundamental reason that a dealer makes more money.

The real reason that car dealers like leases is that it gets the customer back in the store sooner than with loans -- customer retention. In a ten year period, a dealer may only sell one or two cars to a returning loan customer, while he may sell three or four to lease customers. Since lease customers must return their vehicles at lease-end to the dealer, he has more opportunity to get additional business from them. Customer retention rates as high as 80% are common for leasing.

Mercedes and Lemon Laws

In a recent Automobile magazine interview with Patrick Cousins, a well-known successful lemon law lawyer in Florida, Cousins was asked a number of questions about his extensive lemon law litagation experiences and observations. Three of the most interesting are summarized here.

1) Are cars getting better or worse (from a lemon perspective)? The answer: Worse, primarily because of complex technology that fails frequently.

2) Which car makers are difficult/easy to work with regarding lemon law issues? The answer was that the most difficult was Porsche and the easiest were Honda and BMW.

2) What brands do you see most frequently, least frequently? The answer: He sees more problems from Mercedes than from any other brand. He almost never sees Honda.

Car Reliability Survey

Consumer Reports may not be the only source of user-surveyed vehicle reliability data. TrueDelta is attempting to do the same thing by soliciting its users to share data about their vehicles by participating in an online survey.

Essentially, the survey asks about the number and kind of repairs, and the time-in-shop. Based on an analysis of user-reported data, relative reliability determinations are made and published to participating members. Non-participating members pay a fee to see the reports.

Currently, there is not enough data to produce reliablity reports for every make and model vehicle. A minimum of 25 users must report data on each make/model before an analysis is published for that vehicle. As more users find the site and participate, the more substantial the reports will be become.

Leasing is Back in New York

Prior to a new federal law going into effect last year, New York had an antiquated "vicarious liability" law on the books that held car leasing companies partly liable when one of their leased vehicles was involved in an accident that caused injury or death. The new federal law bans such state laws.

Before the new law, lease companies, including all the major car manufacturers' "captive" finance companies either stopped doing lease business in New York, or increased consumer fees to offset some of potential losses. New York already had the reputation (and still does) of being one of the least "lease friendly" states in the country, primarily because of the way it taxes leases. So, for a period of a few years, the leasing rate in New York was far lower than in the rest of the U.S..

The battle may not be over yet. We can anticipate the new federal law to be challenged in existing and future court cases. Only time will tell.