The other often heard mantra "Cars last longer consequently finance terms can be extended." Which implies that CMS (Citizen Main Street) will keep a car for 5-8 year time frame. The lenght of the finance term.
As we often mention the auto industry runs on a 36 month cycle, always did, and always will.
With record new vehicle sales in Canada for the past few years, you have to wonder where all these old cars are hiding, who is driving them, who is maintaining them.
Yes...all manufacturers have access to immense computing power, and can deal with massive amounts of data. Which permits them to acquire market insight that was not available a few years ago.
In Canada MerBimAu (hate to always bring these guys up) has been doing a phenomenal job in selling more vehicles, adding new models, remarketing, increasing CPO sales. We also know that the bulk of the new vehicles they sell are leased.
Lets break it down...some components...
Lease Term: Ideally 36 months, with the occasional stretch to 39-40 month to better position the return of the vehicle, improve the residual risk factor.
The vehicle returns in 36 months, not 60 or 72 or 84, the magic number is 36. It has a remainder of factory warranty, can be reconditioned at a reasonable cost, can apply an addtitional factory extended warranty to CPO the vehicle.
Remarketing / CPO: The idea is to make money twice with a vehicle, dealers that leased vehicles 2 generations ago knew that when the lease reached its term the vehicle would come back offering an opportunity to lease another vehicle to the lessee, and remarket the lease return.
In many instances the lease return is remarketed as a CPO and the supporting financial instrument is a 36 month finance term with a balloon amount at the end of the term.
The Chain Reaction: In the auto business having a chain reaction, taking trade ins, retailing used vehicles has always been a key to generating additional business, and obvious making more money.
Think about this...where are all these older cars? Are they still with the original owner?