This may or may not be GQ-able but I hope so. It might turn into IMHO anecdata.
We’re all familiar with the basic new car lease program. Lease a new car for e.g. 3 years and essentially pay a fee equal to the depreciation plus some profit for the dealer & manufacturer. At the end turn the car back in to the dealer and walk away.
The dealer then has a used car to dispose of.
Has any business ever tried doing a second cycle lease, e.g. years 3 to 6 in the life of the very same car? If not why not?
This is a bog-standard tactic for the lifecycle of commercial equipment such as OTR trucks, aircraft, restaurant kitchens, etc. It’s certainly the way apartment buildings operate. Why not cars?
The period of the lease overlaps the period which the car is under warranty. I suspect that leasing a car without a warranty is a dicey proposition for all involved.
After two 3 year deals there’s so little residual value left in the car it’s not worth it to provide any different rate or terms than a used car loan. That could be an outdated concept now with the certified pre-owned programs and if insurers will cover the cars in the second lease term.
From a financial standpoint, does it make sense for a consumer to lease a 3-year old car when the monthly payments are likely to be the same as purchasing it outright? If not, then I can see why there’s no market for leasing pre-leased cars.
There’s also a difference between the commercial and consumer car market to the extent that aspirational factors play a large role in the latter. I know a few people who lease cars so they have the benefit of driving the newest model without paying the higher monthly payments that a purchase would require (even if they could afford monthly purchase payments on a lower-priced car).
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The people I know who lease cars do it BECAUSE they’re getting a new car every year/two years. The idea of leasing a USED car would be met with disdain, horror, or affront.
You’d probably have better luck on the far downside of the spectrum, and buy cars in job-lots off of rental fleets or heavy-use rotations and create a perpetual lease plan for low-income people who can’t afford a regular car payment but could probably scrape together $100 a month for a lease car with an inclusive warranty and the option every two years to trade in for a ‘new’ model year so they don’t end up with a useless pile of rust by the time they pay a loan off on it in about 12 years. You aim to stay even with operating costs thru the leases (in tiers by the age and value of the car), and make your profit by selling the cars off (or more likely stripping them and selling them in parts) once they’re no longer reliable enough to make it thru a single year lease.
ETA: it’s basically the idea of renting an apt, or of living in an assisted living complex: you’re not paying for a product, you’re paying for a continuing reliable service relationship so that it’s one less thing you have to worry about managing.
I read an article that suggested one of the automakers was thinking of something like that; you’d pay a monthly fee, not to finance a vehicle but to pay for the use of a vehicle. The service might allow you to swap out your sedan for, say, a pickup truck when you need to get stuff from IKEA or Home Depot. Or the service might provide a car when you’re out of town and need a rental.
Are you referring to BMW’s “reachnow” car share program? This is already available in several cities (including here in Seattle), along with other car sharing services like car 2 go. The major issue with these programs for some people is that they only make sense for people living in urban areas, as you don’t actually get to keep the cars in your garage. But this may not be such a big problem once autonomous cars actually start becoming commonplace.
I don’t know what I was referring to, but I’m finding articles about a car-sharing service that Ford was test-marketing in London. Certainly things like Zipcar (owned by one of the car rental companies) are around. But for the car manufacturer itself to offer such a service?
Lasciel’s idea is interesting. Not one I’d considered. The general flakiness and non-creditworthiness of that target market is probably the big obstacle. Still it’d be fun to run some numbers.
The market I was thinking about was for high end cars, not clunkers for the masses.
Lots of folks would like to drive an S-class Mercedes. The lease payment on a new one is WAG $700/mo. Which means a lot of those aspirational folks can’t afford it.
I was thinking the car would be barely broken in after 3 typical years with the typical safe and sane drivers who lease such cars from new. But it’d be a lot farther down the depreciation curve. So somebody could lease a 3 to 6 yo S-class for more like $300/mo. Lots more folks can swing that.
My second assumption is the 6 year residual value of that sort of car is still big enough that there’d be daylight between the 3-year amortized depreciation lease and a typical 5-year purchase loan. Certainly there’d be daylight between a 3 year amortized depreciation lease and a 3-year purchase loan for (WAG) double the principal of the lease.
So I suspect this idea might work for BMW 6 & 7 series, the top couple Mercedes classes, Jaguar, Range Rover, the upper crust Lexi. And certainly the exotics assuming they’re leased from new at all; I just don’t know about that market.
I agree that the 6 year residual value of a Toyota Camry would not make this practical.
I suspect the manufacturers haven’t (and aren’t going to) pursue my idea because the last thing e.g. BMW wants competing with their shiny new 3 series is a 3 year old 7 series. They’d rather lease out 2 cars once than one car twice.
Generally they’re talking about higher end cars. Ones that still have significant value after 3 years.
For the majority of used cars, there isn’t enough financial wiggle room to get the kind of profits the dealers like, esp. considering the uncertainties that apply to leases.
Note that while even a Corolla has decent resale value after 3 years, not so much after the 2nd 3 years. A dealer with a 6 year old car on its lot just wants to get rid of ASAP. The financial return on out-of-lease 6 year old regular car isn’t much considering the fixed overhead per car of taking it in, cleaning it up, doing paperwork, etc.
Leases are generally for people who want to throw money at things in return for …, well, I’m not really sure what.
If you have money to throw away on a lease, you have money to get a new car.
If you are trying to manage your money carefully, a lease, new or used, is something you want to avoid if you’re smart.
(Of course car dealerships make most of their profits on the many less-than-smart people.)