Drivers can continue to unlock equity at the end of leases

Few assets are as volatile as automobiles – they depreciate the minute you drive them off the lot.

But again, supply chain issues have driven used car prices to astronomical levels in recent months. For the drivers themselves, few financing options are as frustrating as lease those vehicles and then deal with the headaches of what to do with the cars when the lease is up.

At a high level, the benefits of a lease are obvious: the initial cost of a lease is lower than buying a car or financing a loan of up to thousands of dollars. The monthly cost is also lower, but then comes the decision of what to do when the lease is up, usually in 36 months.

brandon williamsFinTech CEO End of leasetold Karen Webster of PYMNTS that traditionally options have been limited, usually to the detriment of the tenant, leaving them with really nothing in the way of value or equity.

Automakers tend to want lessees to come to the dealership, with the goal of cross-selling or up-selling them into a new lease on a new vehicle. The leasing company then takes the car that has been traded in and sells it, often at exorbitant prices. OEMs could sell these vehicles at auction, and the residual value to the consumer – well, that gets lost in the redesign.

“They’ve made this process far too difficult for far too long,” Williams said.

Lease End’s data-driven online platform focused on changing the car lease buyout experience. He told Webster that current market pressures have consumers thinking about what could be offered. The general theme, he said, is that anyone who has made payments on their car lease for 36 consecutive months should automatically qualify for a loan.

See also: Consumers shop twice as long before buying a car

“More and more people are starting to realize that they have options, because of the chip shortage. The vehicle they wanted to get is not available to them. [as they come off] lease,” and so they look at what else can be done to literally keep the wheels rolling and realize the $3.00 to $4.00 in equity that has been built up over time.

The platform disrupts the traditional end-of-lease process, helping drivers unlock and monetize the equity inherent in their vehicle. The platform, and its financial partners, either buy out the leases from consumers and they keep their cars, or resell the leases and their cars. The platform makes it easy to fund, titrate, register, and even send customers their new plates.

The company traces its genesis to when Williams was growing up in the auto business in Sun Valley, Idaho (you know it, of course, as the stomping ground of billionaires), where his father had paid for his education by selling cars. Williams followed in his footsteps and ran a dealership in the area, and “started experimenting” with helping consumers get out of their leases…and digital ways to do that became urgent once the pandemic hit.

The market opportunity is there, he said, because there are about 3 million people at any given time who want to get out of a lease in the United States.

Unleash Equity

And the platform, he said, can be a means by which consumers can be educated on the value of the maximum value of equity that has been accumulated – which can then be rolled into a new transaction (by bearing the cost, almost like a down payment).

Loan terms are usually 72 months, he said. In some cases, Lease End will offer to purchase the vehicle directly, thereby becoming the title holder. In the past year and a half since its inception, the company has unlocked $22 million in equity for auto lease owners.

As for consumers, Williams said, “They’ve been driving the cars for three years or more, and they really don’t want to go back to the dealership – here they can buy out their lease in 15 minutes or less, from home.”

Related: Online car platforms are busy retooling in the connected economy as growth slows

Looking ahead, he said that while the auto finance market may stabilize over the next few months, the digital end-of-lease process will still attract auto lessees, given the convenience factor. There’s a particular appeal to the company’s lending partners, he added, given that Lease End customer credit scores are typically higher on lease buyouts than what’s seen at the dealer.

This higher credit profile has attracted large bank lenders who want to expand their portfolios with high quality borrowers. Among them is the TD Bank, which earlier this month said it has entered into a pact with Lease End to help evolve the Lease End platform’s digital financing options and allow lessees to buy back their vehicles.

In terms of the mechanics of the partnership, TD Bank’s use of electronic signatures and online contracts is helping to expand and improve the digital auto finance experience, bringing these activities increasingly online.

Williams said that in just over a year since its launch, the company had doubled its customer volume every six months, giving renters the opportunity to take advantage of removing their cars and redistributing inventory in the process.

“We’re putting those people back in the driver’s seat,” he said.



About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.

About Melanie Tweed

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