Company offers alternative options for credit-challenged customers
Liz Hochstedler, Managing Editor
June 7, 2013
Filed under Features
MotoLease offers alternative financing option for credit-challenged customers
Everyone has heard of an auto lease. Typically the lessee takes on a vehicle with lower-priced payments for about two years. The lessee is restricted to how many miles the vehicle can rack up before its return, and to keep the car, a balloon payment must be made at the end of the lease term.
That may work for the auto industry, but Matt Morton, national sales director of MotoLease, says it doesn’t fly in powersports.
“With the powersports industry, given our slim market reach that we touch, the reason leasing hasn’t really grabbed on is at the end of the lease, when a high residual balance is presented to a customer, or a large balloon payment, it chases the customer away,” Morton explained.
So his company developed a new system. MotoLease provides leases of 18-60 months on unit purchases of $1,000-$15,000 after the down payment, regardless of a customer’s FICO credit score. The program has no mileage restrictions, and the final buyout payment is 7 percent of the original purchase price.
“What we have done that’s unique to leasing is we have set the residual value or the term lease buyout at 7 percent, so if they lease a motorcycle, after the down payment, for $5,000, they can own that motorcycle at the end of that lease for $350,” Morton explained. “So the customer still gains all of the benefits and the perks of the lease, but they still retain the ownership, and that becomes very important — to be able to retain the ownership in this segment.”
MotoLease developed the program as a way for dealers to sell more units. The company has found that more than 50 percent of an average dealership’s walk-in customers aren’t able to qualify for financing. MotoLease seeks to help dealers fix that issue. With a 90 percent lease approval rate, dealers already participating in the program are saving far more sales.
“Of 50 credit applications that are being declined, with MotoLease they’re able to get an approval with 40-45 of those applications,” Morton said.
MotoLease will lease most powersports vehicles, except dirt bikes. To keep track of the financed units, the company uses Kryptonite’s GPS systems, which require batteries not used in dirt bikes. But nearly every other unit in a dealership is eligible for the program.
“Our limitations are what the GPS can be attached to, so typically the GPS can be attached to the motorcycles, ATVs, side-by-sides, utility vehicles, enduros, personal watercraft, scooters. And we’ve leased all of those,” Morton said.
The leases cover any unit from 1998 or later, an advantage MotoLease has over other lenders, Morton said. New and used units both qualify under the program.
As for the customer, all credit levels are welcomed, even from sub- and near-prime borrowers. MotoLease requires that they gross at least $1,500 per month and have had a steady job for a year. The typical lessee will receive a lease up to four times their monthly gross income. Monthly payments are usually set between $95 and $445.
“What’s important is that ownership piece, so buyers feel the unit is theirs and not borrowed from the dealership,” Morton said. “That clears the way for them to customize it and use it like they would if they already paid for it in full. We want the customer to have the freedom, the same freedom they would have with a regular financing purchase, with our lease option.”
On the lease, dealers get to set the down payment, which is usually 10-30 percent. An online dealer interface provides 24-hour instant decisions. A 3.49 percent dealer discount on the lease amount is applied, and dealers are funded their share by electronic direct deposit on the second business day after retuning the lease-purchase agreement. MotoLease has hired regional representatives in each area it serves to help dealers implement the program.
Currently MotoLease’s services are available in Florida, Texas and California, but the company is continuously building on its distribution and is willing to consider leasing in any state where there is enough dealer interest. Morton expects 2013 growth in Arizona, Nevada, Georgia, North Carolina and South Carolina.
The dealerships that have enacted the program already have seen incremental approval increases of about 20 percent. Those in areas where credit issues are more prevalent are sending even more of their business to MotoLease.
“For some dealers, we finance nearly 50 percent of their business because that’s the kind of demographic that they’re in,” Morton said.
Though the program is designed for buyers with less than ideal credit, it’s up to finance mangers to determine when it should be offered.
“For example, I’m a good credit individual, but given the right situation, it may be something that I’m interested in if it were offered to me. So it’s something that needs to be understood: where the benefits are for the customer and where the benefits are for the dealership,” Morton said.
The key is keeping those customers who may have been lost to a non-approval and helping them stay in the industry.
“The ownership’s a big deal,” Morton said. “Motorcycles and powersports, it’s not something they buy just because they need it; it’s something they buy that becomes who they are.”