How Manufacturers Sell Unwanted Off-Lease Cars
As sedan values plummet, automakers look for creative ways to avoid losing money on them.
In theory, a customer only pays for the car's depreciation during the time they have it, which is one reason why lease payments are typically less than loan payments. But due to their general unpopularity, sedans have depreciated more than predicted, which means the manufacturer may lose money not only on the lease but also the sale of the car afterwards. Manufacturers are getting more creative with their solutions to this problem.
More and more off-lease cars are getting reconditioned or repainted, whether they need it or not, to compare more favorably against comparable cars that have not had this treatment, according to Automotive News. This practice is nothing new, but more and more people are taking advantage of it to give their cars the edge when it comes to auction and resale. The report states that manufacturers are more willing than ever to spend $500 on reconditioning a car to improve its value by $750. This makes the manufacturer basically no money but helps make sure their cars get sold over competitors who don't do this.
Another interesting tactic is taking off-lease cars from where the market is flooded to other parts of the country where they will sell at a higher price. A vast amount of pricing data is now available that wasn't during the last market downturn. As a result, it's easy for manufacturers to determine that a 2015 Chevrolet Malibu is worth 9 percent more than the national average in Memphis, Tennessee, and 9 percent less than the average in Miami, Florida, to use the example given by Automotive News. Therefore it makes sense to ship an off-lease Malibu from Miami to Memphis to sell for more money.
The entire article is worth a read. Though it's not quite a case of desperate times calling for desperate measures, auto manufacturers are already preparing creative and unique ways to sell certain off-lease cars despite their drop in popularity.