This is a transcript of MM Podcast Episode 022: Financing More Cars Through Leases With Scot Hall.
Ashley: Welcome to episode 22 of the Motorcar Marketing podcast. In this episode’s main segment, I’m going to be talking with Scott Hall from Swap Lease. Scott offers some interesting tips on how you can better utilize leasing to close more deals and potentially bring in more sales so stay tuned for that.
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So now let’s get into the main segment. Today I’m talking with Scott Hall from Swap Lease. Here is the interview.
Ashley: Welcome, Scott, to the Motorcar Marketing podcast. I really appreciate you coming on the show.
Scott: Thank you very much for having me on.
Ashley: So to start out, I wonder if you can give us a quick overview of your career and how you got into the automotive industry?
Scott: Absolutely. I entered the automotive industry back in my college days. I’ve always been kind of a gear-head and a car nut my entire life and in order to earn some extra money during my college years, I started working in a dealership, started out washing cars kind of at the low end of it and started to realize boy, there’s a lot of potential here for various careers and, of course, the potential to make some pretty decent money. As I got out of school, I looked at some various opportunities otherwise and just didn’t find those as attractive as what opportunities existed in the car business. And one thing led to another, kind of got a ground floor start again in the car business and worked my way up the ladder from there.
Ashley: So when you say you started from the ground up, you started actually selling cars and then worked up through the various jobs from that angle.
Scott: Absolutely. I actually joined on my original position after leaving college, after graduating from college, was an assistant to a finance manager which a lot of that entailed selling on the floor and that grew into a finance and insurance-type position and that grew into a large F&I position and from there eventually grew into my position that I hold currently at swapalease.com.
Ashley: Perfect. Perfect. I actually found you through an article that you wrote about Canadian leases and how they work and how they differ from sort of the logistics of an American car dealer or car lease, and I wonder if you can kind of just give us some of that information, sort of explain the differences and then the main point of the article was sort of how dealers could potentially benefit if they look at this Canadian model and how they can benefit. Maybe we can get into some of those benefits that car dealers listening to this might be able to actually implement.
Scott: (1) In Canada even though it’s a much smaller market overall, automotive leasing is very much more prevalent in Canada, and of course there are many advantages for a dealer to push leasing and tenant leasing, most notably you’re going to cycle through consumers on a quicker basis. In other words, most leases any more, as most listeners well understand are set up on a 36-month set term or three-year term and automotive loans are growing, and growing, and growing. Many are in the 72-month range at this point. So in theory, if you really push the leasing as an alternative form of financing, that’s all leasing really is at the end of the day as another way to finance a vehicle. You’re able to service your customers twice as often in many cases. So pushing the leasing is a better job is done in most cases in the Canadian market. (2) is more specific is on the lease transfer side of the equation. In the United States lease transfers are handled between the consumers and the leasing company itself. Dealers are essentially out of that equation altogether. In Canada the manufacturers, or at least the captive financial arms of the manufacturers had said look, that’s a better way to do this would be to hold this type of transaction at the dealership. Of course, the advantages are several fold. If I wanted to transfer my lease to you and of course you wanted to take that lease over, why not go to a place that specializes in essentially everything automotive, a place that’s comfortable doing the paperwork, a place that’s comfortable to do credit applications and credit approvals and what have you. Of course, they’re going to be sending those out from there. But really what it does is a benefit to the dealer is it gets somebody in there that introduces them to their sales staff for the next time you need a car, introduces them to their service center in order for future repairs and maintenance, and, of course, there’s going to be somebody leaving that lease transfer that may need a vehicle right then and there.
Ashley: And that’s one thing I wasn’t clear on when I read the article so it sounds like it would almost be like a new arm, a new department within an American car dealership that would handle this because the way—and correct me if I’m wrong—just the logistics of this is if you currently have a car, the lease is running out and you say I want to sell it or transfer it, that consumer makes the effort to basically find a new person to take on that car and then it’s just a matter of going to the dealership, not necessarily looking to buy another car but just looking for someone who can handle the logistics of processing this paperwork and turning the lease over so the dealership is not necessarily involved in helping that consumer find a buyer for the car? Is that correct?
Scott: Correct. The dealership would be involved in what I would classify as the clerical part of the equation. Once the person wanting to exit their lease finds or matches up with a person who wants to take over the remainder of that lease, it would be a location that they could go to, to more efficiently and, not only more efficiently, but properly handle that transaction with people who are accustomed to transactions that are similar.
Ashley: And I definitely can see how this would be good because, exactly as you point out, you get the peripheral stuff where you have basically a person who’s getting rid of their old car and hey, by the way, we sell cars over in this nice showroom over here and you can sign them up—the person taking over the lease—you can sign them up for all the service. Realistically can a dealership in the US actually set up this arm of the business and actually get this working?
Scott: Well, right now I don’t see any reason why they couldn’t. It just isn’t the traditional setup at this point, and frankly, I don’t think–I wouldn’t actually look at it as more of an ancillary program to the current F&I department. I think that would be the best way to structure it. Those individuals are already accustomed to getting credit approved, and, of course, credit approval is a necessary step in any lease transfer. It’s no different than buying a new vehicle, and there may even be opportunities depending on the particular lease being transferred for upsale opportunities for extra items such as extended warranties, protection packages, etc.
Ashley: I’m curious. I mean, because this is the standard in Canada, it seems logical that a consumer who is looking to process this type of a transaction would know to go to a car dealership. If an American dealership were to set something like this up, how would they go about relaying that information to consumers so that the consumer knew that this was even a possibility? Hey, let’s go to this dealership because they can handle this paperwork.
Scott: I think it would really be twofold. I think it would be something that the dealer would benefit from educating that consumer when they originally lease that vehicle and then secondarily work in concert with the manufacturers when an individual leases a vehicle, contacts their manufacturer and asks them for potential ways out be it need-based or want-based. It could also be as part of the instructions, if you will, provided by the manufacturer. Hey, go visit your dealer that can help you complete this traction once you find somebody to buy that lease from you.
Ashley: So I just want to go back to one more thing that you said, the leasing rates are higher in Canada than they are here. I mean, I’m sure all the dealerships understand that the leasing is a good thing from their side, but I wonder if you had any tips, how can dealerships potentially get their lease rates up as opposed to, as you said, the more traditional financing. Are there some ways that they can encourage consumers to do this?
Scott: Well, I think it’s becoming less and less of an issue, but I’ve been out of the retail end of the automotive business for a little while now. But I do recall different dealerships or hearing at least anecdotally from different clients that dealerships that they visit didn’t even offer them lease payments. I think the first step would simply be to make sure that the salespeople and sales managers and, of course the professionals as well are very versed in leasing, understanding ins and outs, are able to answer questions and basically give consumers those different alternatives. Once again, leasing is simply a different way to finance a vehicle.
Ashley: Okay. Well, let’s talk a little bit about Swap Lease, the current company that you are working for. Can you give us kind of the two-minute elevator pitch for what you guys do and then we’ll kind of dig into how dealers can potentially work with you.
Scott: Oh absolutely. You can make it quicker than that. Really what Swap Lease is, it’s very similar to a dating service for car leases. We want to match up people who want to get out of their leases. Again, that could be need-based or want-based and match those folks up with people who want to take over leases on the short term. Of course, there are many advantages economically for both sides of the equation, and we’ve had a lot of tests with this over the last 14 to 15 years.
Ashley: Let’s talk about this just for a second. What are some of the advantages from a consumer—I’m a consumer who is looking for a nice car and they go on this—what are some of the advantages to me as a consumer looking to take over someone’s lease payments?
Scott: Well, we call that the buyer side of the equation or the person taking over the lease, and there are several advantages. For one, a lot of folk do like the short-term nature of taking over leasing keeping in mind the lease is shorter term in nature already, and there are people out there that have a need for a car for only 12 months or 18 months and renting a car just isn’t going to be cost-effective for that type of duration. Additionally, they’re going to be able to take advantage in some cases of people who have put down down payments of cash or trade equity making those payments even more attractive than what they might normally be. Additionally, something else seeing as the used car market’s been strung over the last several years is people are taking over those leases essentially treating it as a long-term test drive and then going ahead and buying out those vehicles than they thought it would be.
Ashley: Let’s do the same thing on the seller’s side. What are some of the advantages for the sellers?
Scott: Well, as I’m sure, most would understand is getting out of a lease midterm is a very difficult thing to do economically because it can be very expensive and create a significant amount of negative equity. However, people do lease cars; their needs change, what they need that vehicle for, their job may change; they may lose their job and they get down-sized. They may even get promoted. Maybe they want to get something even more impressive as a vehicle and in getting out midterm can be very expensive once again and simply transferring that lease and you’re paying a small transfer fee is a much more beneficial way for that person to get out of a lease. Additionally, kind of a little bit further downstream, that person’s going to leave that lease with a much better taste in their mouth, much greater satisfaction and be much more likely to lease another vehicle of the same make in the future.
Ashley: And is this service nationwide so consumers throughout the country can do it or are you localized to a region?
Scott: No, we are nationwide in the United States and we do have a footprint in Canada as well.
Ashley: Okay. Perfect. So now let’s just talk about how dealerships, especially maybe even some of the smaller dealerships—I work with a lot of smaller dealerships in Southern California—so how can these dealerships potentially maybe use Swap Lease to help facilitate more sales on their end?
Scott: There are several ways, and kind of jumping back to one of your original questions is let me give you a little more history on Swap Lease. The gentlemen that owned our company are also owners of a large auto group in Cincinnati, Ohio where our headquarters is based, and the idea for Swap Lease was born in the late 90’s actually on the showroom floor of several other dealerships, and the idea was born as a result of them having to continually turn away people who wanted to buy or lease another car today but were stuck midterm in another lease. So their idea was if we could help people get out of these leases sooner or more frequently, and create a marketplace to do so, we’d ultimately be able to sell more new cars. That is definitely one of the advantages is to increase that cycle for the consumer and again accelerate even more than a normal lease. Additionally, somewhat similar to auto trader and cars.com, swap lease has dealer programs available where dealers can advertise their leases to consumers, in other words, lease origination to consumers and show how competitive they can be on lease payments.
Ashley: I see! Perfect. Perfect. Well, Scott, this has been very informative. I really appreciate it. What’s the best way for people to keep up with you or potentially contact you if they want to learn more about something that you said?
Scott: Well, really the best way would be to visit the swapalease website which is simply three words run together, swapalease.com. We have all sorts of information there, not only about lease transferring but leasing in general and that may be another advantage for consumers or for dealers to push their consumers toward as well. And my email address is firstname.lastname@example.org. I would be happy to correspond with anybody.
Ashley: Perfect. Perfect. Well, Scott, once again, this has been very informative. I really appreciate you coming on the podcast. Thank you very much.
Scott: Thank you for having me.
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So that’s our show. I hope you got some value out of it and we can help you grow your business. Thank you for listening.