Toyota wants you to rent cars so you can come back sooner

Toyota hopes to build its rental book in an effort to keep customers coming back to dealerships on a regular basis.

As reported Auto News, recent trends have seen a change in the behavior of the Toyota customer base. More people are buying cars instead of leasing them. Toyota currently has a lease percentage of 14% of total sales, while historically this figure would be closer to 30%.

This is a concern for Toyota, as leases have been an important customer retention tool for the automaker. Tenants typically return to the dealership every three years or so like clockwork. This gives the sales staff the ability to get the customer to re-register on a new lease or sell them a car.

Leases are also a valuable source of used vehicles for dealers. Leased cars are usually serviced according to the manufacturer’s schedule, and many are later sold as certified pre-owned vehicles at a high profit margin. Dealers can also use leases as a flexible tool to maintain business. Dealers may offer to call rentals early to try to increase sales, or they may be extended if inventory is limited.

Talking to Auto News, Toyota North America chief David Christ blames supply chain issues related to the pandemic. Stocks of new cars were much lower than usual due to limited availability of parts. This has led automakers to reduce the incentives typically used to trade in leased vehicles. The trickle-down effect was that customers instead found better value in taking out loans to buy vehicles instead of leasing. The low interest rates of recent years have likely contributed to this, making monthly payments lower than they otherwise would have been.

Christos believes leasing numbers will not rebound until dealer inventory levels stabilize. Once demand for new vehicles no longer exceeds supply, he expects customers to return to leasing in greater numbers. However, the return may be delayed by customers with loans to repay on the purchased vehicles. Once those customers have equity in their vehicles and are ready to shop, however, the stage will be set. Christ indicated that Toyota will look to offer those customers the opportunity to switch back to a lease when the time comes.

For customers who enjoy driving a new vehicle regularly, leasing can make a lot of sense. However, with new vehicles thin on the ground and incentives nowhere to be seen at dealerships, it’s clear that the offer has become less popular. However, as the auto industry slowly returns to normal after the pandemic disruptions, we would expect leasing to return to previous levels.

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