Leasing speeds up New cars leased per year, as a percentage of retail deliveries (graphic) SHORT LEASES: `THEY'LL BE BACK' TWO YEARS FLY BY WHEN CONSUMERS WANT A NEW CAR, DEALERS NEED NEW DEALS

Auto leasing was once reserved for wealthy buyers of luxury cars. Today, carmakers are using it to create and maintain long-term customer loyalty for drivers of all classes of cars. Leasing has grown dramatically within the last few years. According to consultancy CNW Marketing/Research, leasing accounted for 27.7% of total new car sales in 1993, up from 23.1% in 1992, and 19.7% in 1991. The company believes the trend will continue and expects leasing to account for 39% of total cars sales by 1998. In general, leasing has become popular because it's a win-win proposition for consumers and marketers. Consumers like leasing because it makes the vehicle more affordable with 24-and-36-month lease monthly payments running about the same as a 60-month retail contract. Although they won't own a car at the end of the contract, they can lease another new car or arrange to buy or re-lease their current vehicle. Manufacturers and dealers like leasing because the newer, short-term leases ensure the consumer will be back for a new car within 36 months. That gives them the time to cultivate a relationship with these customers and lay the foundation for another lease contract-or a sale. Bill Bruce, VP-general manager of Nissan's Infiniti division, says his company's research indicates a 36-month lease contract offers the greatest opportunity to build a relationship with the consumer. During the lease term, dealers keep in contact with customers through thank-you letters, reminders and special offers for service work and maintenance and birthday greetings. Additionally, the company provides a free G20 loaner car to lease customers having their cars serviced. Six months before a customer's lease expires, the company invites the individual to visit the dealership and see what's new at Infiniti. As a result, 40% of Infiniti's lease customers purchase or lease another Infiniti, Mr. Bruce says; 60% of Infiniti's retail sales are through leases. "We've spent a lot of time and effort at Infiniti becoming one of the leaders in moving the industry toward cus tomer retention and not depending on new faces for sales," Mr. Bruce says. Using leasing to build loyalty has evolved into a way of business at Ford Motor Co., the apparent leader in the auto leasing field. Ford's retail leasing business in the U.S. increased more than 70% in 1993, the company reports. In 1993, 16% of Ford's retail sales were leases, up from about 12% in 1992. Ford currently holds 38% of the lease market. Robert Rewey, group VP-marketing and sales operations, Ford North American Automotive Operations, says Ford has been working on its lease strategies for the last five or six years and is beginning to see results through customer satisfaction and loyalty. Mr. Rewey says Ford's lease renewal rate increased significantly in the fourth quarter of 1993, and the company expects a 60% renewal rate in 1994. "There are many reasons why leasing is such a hit," Mr. Rewey says. "Customers tell us they like the hassle-free process, and this has translated into a higher degree of customer satisfaction for Red Carpet leasing versus conventional financing." Some marketers have found that offering leases on lower-end vehicles makes a useful first step in creating customer loyalty. Volkswagen of America, for instance, is hoping to strengthen its relationship with its customers with four-year lease deals on Golf III and Jetta III. The plan, available for '94 model-year cars, calls for no money down and $169 a month for Golf and $199 a month for Jetta. "People change vehicles as their transportation and life cycle needs change," says Susan Jacobs, president of Jacobs & Associates, an automotive consultancy. "If you can get customers when they are young, you have more opportunities for repeat customers." Because lease payments are usually smaller than retail payments, leasing lets consumers move up to more expensive vehicles than they could otherwise afford. "What drives the whole thing is the ability to bring the payments into the consumer's budget constraints," says George Reganis, director of SmartLease and SmartBuy for General Motors Acceptance Corp., where about 20% of GMAC retail financing contracts are leases. Leasing has become so much a part of the auto industry, information outlining lease deals is a major theme in local, regional and national advertising, including image-oriented TV commercials. Manufacturers, who have largely shunned price ads in the past, apparently can't resist touting their attractive lease deals. In a Wall Street Journal page ad earlier this month, American Honda Motor Co. promoted its 1994 Civic DX sedan at $1,000 down and $169 a month for 24 months; and its 1994 Accord DX sedan at $1,300 down and $199 a month for 24 months. The Civic DX sedan and the Accord DX sedan, have sticker prices of $12,100 and $14,680, respectively. In Detroit, Infiniti dealers teamed up in a newspaper ad to promote the 1994 Q45 for $599 a month for 36 months and no down payment. The car has a sticker price of $50,900-more than double the amount paid through a lease term. Leasing not only helps boost loyalty to the marque but also to the dealer, some say. Art Spinella, VP-general manager at CNW, says leasing customers are more likely to return to the same dealership for some sort of purchase, service or to lease another car, than are buy-ing customers. "Loyalty to the manufacturer is similar to the loyalty to dealers," Mr. Spinella says. "Our dealers have more frequent dialog with customers who lease, and they like the fact that there is a higher owner retention with leasing," Mr. Rewey says. As leasing gains in popularity, many manufacturers are adding new twists to their lease deals: Lexus division of Toyota Motor Sales USA is offering "multiple security deposits," which allows a customer to reduce his or her monthly payments by increasing the deposit amount. In January, Ford completed the first phase of a pilot program in Las Vegas that offered customers a choice of three or six consecutive two-year leases at a fixed monthly payment. Ford says it will test the program further, with some modifications, and potentially in additional market areas. Manufacturers are leasing used cars, to dispose of the thousands of vehicles that come back into the market annually when the initial leases expire. Ford announced a new used-car lease program last month, enabling consumers to lease 2- and 3-year-old cars.

Leasing speeds up New cars leased per year, as a percentage of retail deliveries (graphic) SHORT LEASES: `THEY'LL BE BACK' TWO YEARS FLY BY WHEN CONSUMERS WANT A NEW CAR, DEALERS NEED NEW DEALS

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