How Leasing Companies Operate – Discounts
Photo by Mike
Originally Posted On: https://www.carleasing.guru/how-leasing-companies-operate-discounts/
Leasing companies cannot operate without the discounts they get from manufacturers, FACT!
There are three main ways in which a leasing company will get consistent discounts. One is through the manufacturer, the other through the dealer and the third through a third party who has access to discounted vehicles (through their existing relationships with the manufacturer) – There is a fourth discount too, which is usually a rebate, but this only really applies to the bigger leasing companies who buy a lot of vehicles where they might get an additional 2% or 3% off after a certain period.
- Additional Rebate
Each of these discounts may be separate in reality, but they all link together to provide the maximum discount possible to the leasing company.
The level of discount applied is very much specific to the leasing company who will be buying the vehicles, how large the leasing company is, whether they buy in bulk, have they bought the product before, do they have current stock etc. There are many variables that dictate the level of buying power a leasing company has. To give you a small insight into some of the discounts available, if I were to tell you that some leasing companies could get a manufacturer discount of 25%, a dealer discount of 20% and an additional “thanks for doing business with us” rebate of 2%, would that surprise you? A brand new, factory fresh vehicle with 47% off.
Using the example above on a £30,000 vehicle directly from a manufacturers list price (without options). A leasing company will it for around £16,000. You or I pay the difference between the purchase price of £16,000 and the residual value at the end of your term (plus maintenance and interest).
These types of discounts usually apply for a whole year, and then change in January with updated models. Some vehicles are also so new that the discount won’t be available for a few months (The third party will usually reissue the updated terms if that’s the case). Manufacturers also have company-specific deals with leasing companies, so whilst the third party is usually the generic default for everyone, some companies don’t even use them because they get even better deals elsewhere. But that all depends on the size of the leasing company.
We all realise that the more you buy in bulk, the more the price comes down. This is the same as buying vehicles from manufacturers.
Some manufacturers will offer bigger discounts to leasing companies to get more market share and make less profit. Other manufacturers don’t really care about discounts too much because they know they can get people through the door no matter what (and already have the market share). Land Rover for example.
With that said, this is about understanding where us as consumers can get a discount.
Tip: Try not to lease a vehicle if has just been announced, your discount may not be available for the vehicle you need. This mostly applies to car leasing. Vehicles like a new BMW 3 Series may not have a discount applied, or if they have, it will be unbelievably small. Reason: supply and demand. They (the manufacturer) don’t need to offer discounts because the vehicle has had it yearly volume allocated to customers, or they know they can get the contract hire rate they ask for anyway because of demand. So be wary of that. If you are desperate for a vehicle, then you will ultimately pay a premium for it.