The Automobile Leasing Experience

Patrick Short owns, leased or has owned six Hondas, one Toyota he bought from his parents, 2 Dodge Caravans and a Mazda that his late mother-in-law wasn’t driving any more. He also has to do all the math as GM of CSz Portland.

Part One

In addition to running our own brick and mortar theater, and working with clients using Applied Improvisation, CSz-Portland does a lot of outside shows. We tour to corporate, church, school, association, convention and private events a lot – over 100 events per year, most years. Since 2007, we’ve also toured at least 40 scripted shows a year to schools under a contract with Metro, our regional government (“Making a Great Place”).

This requires transportation.

Our business owns or leases two mini-vans. One of them is mostly driven by me, and I pay taxes on the personal usage; 80% of the mileage goes toward business.  The other van “lives” at our theatre, and is used 100% for the touring shows, purchasing stuff for the theater, recycling and errands.

Our current vans are both Honda Odysseys, a 2010 and a 2013.

We leased the 2013 this spring when our wonderful old 1999 Odyssey hit 165,000 miles and some major repairs were needed. Using some math, I determined that the short-term  lower-cost option was to sell it as-is and lease a new one.

I headed out to a Dodge dealer, thinking that a low-end Dodge Caravan (I’d seen prices in the $19,000s) would lease out for around $250-270 for 360 months. And for the usage, that would be a decent vehicle (just don’t let Dodges get old is my experience.)

Well, no.  They wanted to lease me a more expensive vehicle after they saw the credit report, and the lease for either one would run $370 per month. In a month where dealers were doing leases at 0.9%, the low-end Dodge was over 6.5%.

I thought perhaps a $28-30,000 Honda might be available at that price, and I was right.

Why? They say the Honda has a higher resale value, and while that is true, the hidden truth is that the Dodge dealer and their banks don’t want to lease lower cost vehicles. I was told there was no market for a three-year old Dodge Van with the basics, even at a residual of $9-10,000. (What?)

We leased a Honda Odyssey worth $28,500 for less than a Dodge Caravan worth maybe $20,000.

1. Give the customer what they want if you have it.

Even though we did lease the Honda, it was not a perfect experience. The salesman kept running back to his “manager” (who I never met) and kept coming back with problems that raised the price beyond what he had quoted me. Three times or more.

“We’re not sure we have the LX in stock, but we can deliver an EX model – $2000 more – today.”  (Your website lists this VIN number LX. I would like that one, please.)

The floor mats were “special” and therefore, they needed to raise the monthly cost by $14. Over a 36-month lease, those mats would cost $504. (Pull them. I even offered to remove them myself. At least, I got a laugh out of him.)

The dealer had added special tires at (I think) $25 per month. (Put the standard wheels back on, please).

We also went through the standard refusal of additional warranties, and other dealer markups. (No. Thank you.)

2. State the price and offer fries with that if you are burning to sell more stuff. Don’t raise the base price because changing things out is hard.

It’s also fair to remember that the customer in this case had leased two Honda Odysseys before and was looking for another one. Hmmm.

3. Do your best and accept that no means no on the extra stuff. Especially when you have a qualified buyer who is ready to go – you’ve checked the credit – right in front of you.

I spent two hours saying no to things, correcting misinformation and being “sold to”.

4. Tell the truth. For crying out loud, some people even know it when you’re lying.

Despite the dealer taking several runs at me, we did the lease and we’re fine.

Now, the 2010 Honda’s lease is coming due.

Do I buy it with a loan? Do I just hand it in and go shopping? Do I trade it for a new lease?

It’s almost been a hobby asking folks what they would do. I get different answers all the time. The 2010 gets inspected by Honda Finance’s third-party inspectors next week. Is my wear and tear higher than $1500? Well, we’ve assembled the service history, we’re below the miles limit, we’ve scuffed some interior plastic with our sound equipment and I can’t wait to find out. It’s an improvisor’s dream – I don’t know what’s going to happen!

As this process unfolds, I will share it with you in the hopes that we all learn something about customer service. Remember, your mileage may vary. Leasing may not be right for you or your business. (It’s usually good for businesses, and loaded with gotchas for individuals.)

I’ve enjoyed reading some thoughts on this process from Colin Shaw.

And if Honda is listening…  Hey! You want to move another unit easy? Or do you want to grind?

Part Two

We received a letter from American Honda this week. They have “pre-authorized” us for another lease or purchase, up to $44,450.

$44,450 seems like a curious number.  It’s not. It’s the list price of the loaded Honda Odyssey Touring Elite model. In 2014, this comes with its own vacuum cleaner, an automotive innovation that cracks me up. Honda knows the priorities of their target demographic. This makes me a soccer mom.

When I take this letter to the dealership, it will do two things. It might save me the few minutes they take to check my credit. It will also make them think that I have all of that money to spend on the next lease. Even if I did, I wouldn’t.

I don’t need a vacuum cleaner attached to my next van.

In other news, the 2010 van has been inspected, and $200 in damage beyond “normal wear and tear” has been noted. The front tires are worn, at 33,000 miles, so that is beyond normal wear and tear. Interesting concept, seeing as all I did was drive on them. They were rotated several times. I’d say these were not long-wearing tires, as opposed to damage, but I am not the professional here.

Since Honda has an allowance of $1500 in “beyond wear and tear” damage, we’re cool. The van is in good shape. I will not have to pay more to turn it in, if that’s the choice we make.

The next step is to call the dealer and tell them we’re looking. Should be fun. Probably won’t be.

Part Three

On the advice of one Ken Wells, who did some time as a car salesman, I called the dealership, asked for the “leasing manager” and was given to the sales manager. He talked to me for a couple of months, looked me up, and gave me over to his top sales guy – David has been there 17 years. OK.

I went in, told him that I wanted an EX-L model (sort of the middle – leather, lots of fun stuff but no vacuum cleaner), but if the price wasn’t right, I would take an LX (the lower end).

The lease factor is now .08; it was .06 in March when I leased the 2013. That, combined with high demand for the 2014 models and brisk sales mean that I might not do as well as I did in March.

My big advantage is that the 2010 van’s value is way above the residual on the lease. It’s worth around $24,000 and the residual is $17,776.20. The result of that is I have some equity in the 2010 and can apply it to the new lease to make the monthly payments lower.

And that’s what we did. The payments on the fancy 2014 are a little below what we’re paying on the 2013 (I didn’t have a trade in on that one, I sold the 1999 as is. Or was.)

David was straightforward, there wasn’t much running back to the sales manager – almost none – and the finance guy Kirk did the paperwork in record time.

Result: that was a decent experience. They treated me like a person who had earned some respect. (I wish everyone could have that experience.) My daughter has named the new blue van “TechnoVan” and we’ve put a whopping 70 miles on it. It’s already done a road show and been valet-parked. It’s awesome. I particularly like the camera that shows you what’s in the blind spot on your right side when you turn the signal on.

If you are looking for a Honda in Portland, contact me and I will direct you to the dealer and to David.

And three years from now, I get to do this again. Twice.

 

 

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