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Popularity of Leasing Catching Up With Automakers

Companies seeing profits falling on off-lease cars, newly leased crossovers and sport utes.

by on May.30, 2017

Leasing's popularity may cause automakers problems when it comes to profits in the next few years.

The rise in leasing during the last few years has been one of the drivers of the record sales automakers have enjoyed during that time. However, leasing has its downside and that part of the equation is about to hit automakers — hard.

Three years ago, automakers leased 3.3 million vehicles, accounting for about 23% of U.S. sales to individual buyers, according to Automotive Lease Guide. As long as the vehicles hold their value, this isn’t a problem. In fact, it’s a good thing because it gives automakers a steady stream of higher-profit used cars to sell.

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This is good for cars because they made up about half of vehicles leased at that time. However, now that the popularity of cars has fallen, this is likely to cause problems for the makers. (more…)

Toyota Stealing From Big Three Playbook

With sales in freefall, Japanese maker offering Detroit-style sales incentives.

by on May.07, 2009

Storm clouds on the horizon. With even the new Prius off to a slow start, Toyota is rolling out Detroit-style rebates, subsidized leases and other incentives.

Storm clouds on the horizon. With even the new Prius off to a slow start, Toyota is rolling out Detroit-style rebates, subsidized leases and other incentives.

It used to be a point of pride for Japanese makers, Toyota in particular.  In fact, senior Asian executives could barely contain their glee at watching their Big Three Detroit rivals run up billions of dollars in costs on the rebates and other incentives needed to keep the metal moving.  Japan, Inc., on the other hand, happily collected a premium over sticker, especially on its most popular models, like the Toyota Prius hybrid.

Or so went the story line.  The reality was never quite so neat.  The Japanese have long had incentives, especially the smaller, weaker makes.  But the big brands generally kept that news quiet.  As Toyota’s Senior Vice President Don Esmond would acknowledge, “We have to remain competitive,” even if that meant just offering some cash that dealers could kick in to clinch a deal.

No longer.  The current economic downturn has been surprisingly democratic.  With sales currently running at just little more than half the peak levels of early in the decade, there isn’t a brand that hasn’t felt the pinch. Even Subaru and Hyundai, which initially seemed to defy the downturn, were off last month.

And then there’s Toyota.  After defying gravity, seemingly for decades, it has suddenly come crashing back down.  Its sales tumbled 41.1% in April.  While it’s clear that the traditional spring buying season hasn’t shaken off the hoary frost of winter, Toyota’s numbers were down much more than the overall industry’s 34.4% drop for the month.  In fact, Toyota saw a steeper dip than almost anyone other than Mitsubishi, down 55%, and bankrupt Chrysler, off 48%.

Subscribe to TheDetroitBureau.comToyota’s downturn could be seen across the board, with big drops by perennial Top 10 favorites like the Camry and Corolla, as well as the poster child for the environmental movement, the Prius. 

Indeed, the hybrid’s numbers, so far this year, have been running barely a third of where they were during the mid-2008 fuel price run-up, despite the launch of an all-new version of the Prius.

Intent on heading off the steady slide, Toyota has been taking a variety of steps, including unprecedented production cuts, notably at its U.S. operations.  Now, it’s beefing up the rebates and incentives it used to sneer at – and it’s no longer hiding that fact.