Few assets are as volatile as automobiles — they depreciate the minute you drive them off the lot.
But then again, supply chain snarls have driven used car prices to astronomical levels in recent months. For the drivers themselves, few financing options are as frustrating as leasing those vehicles, and then dealing with the headaches of what to do with the cars when the lease is up.
At a high level, the advantages of a lease are apparent: The upfront cost of the lease is lower than buying a car outright or financing a loan that can run into the thousands of dollars. The monthly cost is lower, too, but then comes the decision of what to do when the lease is up, usually in 36 months.
Brandon Williams, CEO of FinTech Lease End, told PYMNTS’ Karen Webster that traditionally, the options have been limited, usually to the lessee’s detriment — leaving them with nothing, really, in hand in terms of value or equity.
The car manufacturers tend to want the lessees to come to the dealership, with the goal of cross-selling or upselling them into a new lease on a new vehicle. The leasing company then gets to take the car that’s been traded in and sell it, often for sky-high prices. The OEMs might sell those vehicles at auction, and the residual value to the consumer — well, that gets lost in the shuffle.
“They’ve made this process far too difficult for far too long,” said Williams.
Lease End’s online, data-driven platform focused on changing the car lease buyout experience. He told Webster that the current pressures in the market are opening up consumers to consider what could be on offer. The overarching theme, he said, is that anyone who’s been making payments on their car leases for 36 months straight should automatically qualify for a loan.
“More people are starting to understand 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’re examining what else can be done to literally keep the wheels turning and realize the $3,00 to $4,00 in equity that’s been built up over time.
The platform upends the traditional end-of-lease process, helping drivers unlock and monetize the equity inherent in their vehicle. The platform, and its financing partners, either buy consumers’ leases and they keep their cars, or they sell the leases and their cars. The platform facilitates funding, titling, registration and even sending customers their new plates.
The company traces its genesis to Williams’ time growing up in the car business in Sun Valley, Idaho (you know it, of course, as the stomping grounds of billionaires), where his father had paid for college 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 means of doing so became urgent once the pandemic hit.
The market opportunity is there, he said, as there are about 3 million people at any one time who want to get out of a lease in the U.S.
And the platform, he said, can be a means by which consumers can be educated on the value of the maximum value of the equity that’s been built up — which can then be rolled into a new transaction (defraying the cost, almost like a down payment).
Loan terms are typically 72 months, he said. In some cases, Lease End will offer to buy the vehicle outright, in effect becoming the title holder. In the past year and a half since inception, the company has unlocked $22 million of equity for auto lease owners.
As for the consumers, Williams said, “They’ll have been driving the cars for three years or more, and they really don’t want to go back to the dealer — here, they can buy out their lease in 15 minutes or less, from home.”
Looking ahead, he said that even though the vehicle financing market might settle down over the next several months, the digital lease-end process will still appeal to auto lessees, given the convenience factor. There’s a particular appeal for the company’s lending partners, he added, given the fact that credit scores of Lease End customers are typically higher on the lease buyouts than what is seen in the dealership.
That higher-credit profile has attracted big bank lenders who want to expand their portfolios with high-quality borrowers. Among them is TD Bank, which earlier this month said that it struck a pact with Lease End to help scale the Lease End platform’s digital financing options and enable lessees to buy out their vehicles.
In terms of the mechanics of the partnership, TD Bank’s use of eSignatures and online contracts help extend and enhance the digital automobile financing experience, bringing those activities increasingly online.
Williams said that in just over a year since its launch, the company has doubled its customer volume every six months — giving lessees an opportunity to profit from getting rid of their cars and redistributing inventory in the process.
“We’re putting these individuals back in the driver’s seat,” he said.
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