Making the case against haggling, for lease-swaps

By Bill Griffith

April 1, 2013

4 minutes to read

Last week our topic was leasing, concentrating on how the process differs from traditional buying, and demonstrating some of the additional costs involved.

As always, there’s much more to the story. Two folks who make their living in the automotive business offer some ampliﬁcation.

Jeff Morrill, who calls himself the “un-owner’’ of Planet Subaru in Hanover, makes both a case for leasing and a case against haggling. Scot Hall, vice president of Swapalease.com, explains how the consumer can exit a lease contract early or assume the remainder of someone else’s lease.

First, Morrill on haggling, whether leasing or buying outright. “When I’m giving advice, I generally discourage haggling as a way to get the best deal because it tends to create an adversarial environment and the customer ends up walking away feeling bad about the experience, even if he’s saved a little money,’’ he says.

“Instead, I recommend buyers visit dealer websites and ﬁnd a couple of stores they think they would like to do business with. Then ask the dealers to prepare apples-to-apples quotes, in writing. We do this every day for people. We dealers know we’re operating in a very competitive environment and need to work on slim margins in order to earn the business,’’ Morrill adds. “If you end up preferring one dealer over the other, you can always politely ask one to match the other.’’

Morrill also has an opinion on the “With a loan, I own the car at the end’’ approach to lease-vs.-buy. “That’s true, but it’s likely not much is left— you’ll have a ﬁve-year-old one with higher miles. If the lease saves you $120 a month during a 60-month loan, that’s $7,200 in your pocket instead of in car payments.’’

As for the “I can’t trade in the car before the lease’s end’’ fear, he says, “Actually, you can. After driving your car for 30 months, don’t you think it’s less expensive to get out of a 36-month lease that’s almost up rather than a 60-month loan that’s only half paid? Approximately 40 percent of people owe more on their loans than their car is worth. Not only do they not have equity, but they are also actually upside down in the loan.’’

That brings us to Swapalease.com, a spinoff from the Joseph Auto Group in Cincinnati, a 13-brand franchise that’s been in business since the 1930s and always has been in the forefront of leasing.

As Hall, Employee No. 1 at Swapalease, says, “There are lots of advantages to dealers in leasing, especially with the traditional three-year term. Most important, the customer is back in the showroom more often than if they had a ﬁve- or six-year loan.

“But there always was a downside, too. The Joseph Group wanted to serve the people coming in who wanted out of a lease. In one of those eureka! moments, they realized if they could create a marketplace for ending leases, they could be selling more cars and satisfying more customers.’’

Enter Swapalease, a website that facilitates the process of taking over the leftover months and payments of a lease someone else (the seller) wants to escape. The system offers advantages to the new “buyer.’’

“They like the fact the original buyer put equity into the lease, either a trade-in or down payment,’’ says Hall. “And it’s a short-term deal, usually in the 18- to 20-month range. That’s shorter than you’ll ﬁnd in a new lease.’’

Many of the cars offered are luxury vehicles. “We’re based in Cincinnati.That’s the home of Proctor & Gamble,’’ says Hall. “It’s a massive company and it’s not uncommon to see a listing for an executive’s car because he’s been transferred.’’

Other scenarios: “Maybe you have a BMW 5 or 7 Series and you get a different job or are facing a pay cut. Maybe you haveaCorvette and there’s a baby on the way,’’ he says. “Both are reasons to come to us.’’

It’s not only the lessees who come to the website. Banks and leasing companies prefer to see leases taken over instead of having to repossess a vehicle.

“Our site explains the leasing company’s transfer policy,’’ says Hall. “Roughly 75 percent of these companies permit transfers. They get some additional fee income and get some customer satisfaction.’’

Hall says there generally are 4,000 to 5,000 vehicles listed on Swapalease. Searching the database is free. Signing up requires a $59 lifetime membership fee.

“Leasing companies generally charge a transfer fee of approximately $300,’’ says Hall. “That’s typically negotiated between buyer and seller, or split, depending on who’s getting the better deal,’’ says Hall. “After that, it’s like a new origination—credit check by the leasing company, paperwork, and transfer.’’

The majority of swaps occur within 100 miles of both parties, says Hall, but Swapalease does have a transportation partner. The company also recommends the vehicle be inspected by an unbiased third party.

Swapalease has been around for 12 years now and, according to Hall, sees a trend: “Almost two-thirds of our customers coming in are repeat buyers.’’

Etc.

Automotive News annually lists the nation’s Top 125 dealership groups (by sales). Florida-based megadealer AutoNation, Inc. with 221 dealerships, 521,910 units sold, and $15.6 billion in revenues ranks No. 1 for 2012. Houston-based Group 1 Automotive (owner of the Ira dealerships in this area) ranks No. 4. Herb Chambers, a privately held entity, ranks 14th with 32 dealerships, 65,829 units sold, and $1.99 billion in revenues. Western Mass.-based Balise Motor Sales comes in at No. 57 and Colonial Automotive Group of Acton is 93rd.