Lease Return Dry Up, EV Registrations Rise, Car Shopping Myth Buster

Kyle Mountsier: 0:13

It is Friday, June 21. dealers all over the country are banding together, figuring out how to keep the doors open. We're talking about lease returns, Evey registrations and car shopping. People really want to know who that is. Come on,

‍Michael Cirillo: 0:28

they stopped this day when they seem your timing is impeccable.

Kyle Mountsier: 0:32

We've only done it like 733 times or something. I don't know. It's funny you like, there's this, there's this thing going on in your head. That's, you know, because none of that was scripted. Like, it's, you know, I kind of know what the vibe is. And there's this thing going on in your head the whole time. We're like, your brain is two words ahead of the pace, but it's also thinking about the fact that the music is playing, it's

Michael Cirillo: 0:57

gonna be DJ.

Kyle Mountsier: 0:59

Well, yeah, you know, I don't ever want to do that. But okay. Hey, we are doing a live stream today at noon, Eastern, that's 11. Central, that's nine Pacific, if you're listening to this, it is a full hour live stream with a whole bunch of people that are impacted or thinking about how to keep the doors open, keep processes running, ensure that your team is operating with efficiency in the midst of a shutdown. So obviously, right now 1000s of dealers dealing with the CDK shut down, but there's going to be best practices shared here for if the power goes out, if there's a hurricane, or there's a massive snowstorm. And and the the dealers that are kind of been together saying, Hey, we got solutions for this are going to be really cool. So I'm excited about that be awesome, as well. So yeah, actually, also, if you if you're gonna miss that, and you just want some resources, you can go to ASOTU.com Scroll down just a little bit to latest stories. And we've got a full resource page where industry partners and dealers, and everybody has been just like sending us documents or resources or links or available free products to, to make sure that that operations are still rockin and rollin as well. Love it. I'm excited about it. Have you heard? I'm sure cyrilla You talk to dealers all the time? What's the what's the sentiment out there? What, uh, what are people doing right now and your world?

Michael Cirillo: 2:28

Tough and half. Some of them are, you know, I can't blame the ones that are capitalizing on this and saying we're still open, we still fully have a process. There's a small, small group in there that I like, well, we're impacted. But I still know how to use a pen and paper. And so they're going for it. And then there's some that are like

Kyle Mountsier: 2:51

well, yeah, can you imagine like a dealership that all of the management staff has grown up in the last like four to five years are you know, because there's plenty of those where it's like a younger staff, younger management staff that never, never even like grabbed the 10 key to calculate a payment never grabbed, you know, all of those things that at least when I was growing up in the business, like I had, I did it manually, right. The second pencil was always manual, like I never wanted to Reynolds or CDK or anything like that. So yeah, it's it's an interesting timeline when everybody is been focused so much. There

Michael Cirillo: 3:25

are some sorts of stop matrix printers coming out of the closet right.

Kyle Mountsier: 3:38

Oh, man, all right. Well, let's get into it. We got a few things to talk about today. i This is a story that's kind of been developing over the last few years, but we're starting to see the impact. Dealers are starting to brace for a significant decline in lease turn into lingering impact of the COVID 19 pandemic and image inventory shortages, the reduction, the reduction threatens new vehicle sales, CPO programs and customer attention. Basically what what everybody that what the analysts are looking at as lease returns are going to begin to slow next month, impacting new vehicle sales CPO programs as well. In mid 2021, listen to this, the leasing rate dropped dramatically from one in three new vehicles to as few as one in six homes. The analysts are now saying that US vehicle supply is not going to return to 2023 levels. So that's just a year ago, until the end of the decade due to this lease shortage and the return shortage of trade shortage. GM dealers going to be hit sometime in 2020 for Toyota dealers, you know, it's not till 2026 that they're going to have issues which means they're probably not going to have a good friend of ours of mine A Tyson jomini was quoted saying three year old off three year old off leased vehicles are the backbone of the used car market. Even though we'll still see used car prices fall because we're unwinding the COVID supply chain dynamics in the industry, the lack of lease earnings is going to help support the bottom of the market. So we're not going to be back to where we were previously. Speaking of used car prices, so there's gonna be kind of like a middle of the market. It sounds like where where some of the highest price vehicles come down to a normalized but the lower price vehicles stay high because of this lease return issue.

Michael Cirillo: 5:34

Why up? Yeah, you know, it's funny, too. I mean, one of our vehicles is financed, one of them is leased. And I, it's been less than a year like I, I started my lease in November, and I'm already thinking about what am I going to do at the end of my term? Am I just going to roll it into a finance deal? Am I going to turn it back into, like, what do I do and I know I've just made all sorts of people angry with me. They're like, you're gonna turn it in, but you're gonna turn but I think it represents like if I feel that way and I'm in the business or around the business, I wonder what just the general population that's leasing vehicles is feeling.

Kyle Mountsier: 6:10

Yep. And I'm guessing you're leasing an Eevee right. Now, no,

Michael Cirillo: 6:15

I'm the EVS getting finance EVs. My, my truck is what's getting leased. Yeah, look at that. Look

Kyle Mountsier: 6:22

at that. Well, hey, I kind of threw in my own segue. But speaking of EVs segue. Despite concerns of market cooldown that we've been hearing, this whole year, electric vehicle sales actually continued to grow in April with notable contributions from listen to these these cats, Ford rivian and Toyota No, you don't hear Tesla in their drastic price cuts and incentives lead to over 10,000 in savings on some models of boosting Evie registrations last month by 14% EVs accounted for 7.4% of total light vehicle registrations outpacing the overall market 7.3% gain so EVs gaining market share faster than the markets gain in vehicle sales. This is wild because I have not seen this vehicle out there but the Toyota Bz 4x Remember that one? So I 646% increase in registrations, leaving a surge, the maki and Ford F 150. Lightning were up 287 and 96% respectively like booming rivian and ai n Hyundai also seeing 127% and 93% growth. Tom Levine the associate director of industry sales analysis at s&p Global said automakers are bringing Evie prices down to the ice level and it is moving merchandise.

Michael Cirillo: 7:50

Wow. No Fisker on the list.

Kyle Mountsier: 7:54

Oh 202. Soon,

Michael Cirillo: 7:56

Cirilo. I'll see myself out.

Kyle Mountsier: 7:59

Well, you know, I think when you look at like the affordability issues and that are that have been kind of plaguing the market, we you know, we ran a story on interest rates in the daily email, which if you don't get should get but you know, when you look at affordability across the board, and and these EVs getting into the price point, affordability because of all the government incentives, the state incentives, the manufacturer incentives, trying to move the cars like it becomes a super logical price point.

Michael Cirillo: 8:29

I mean, it's been a fun ride to watch since the kind of beginning of the Evie narrative to where we've progressed to now because I mean, pretty much all of the old narrative that used to exist doesn't exist anymore, right and now it's becoming more and more difficult to ignore the fact that these numbers are what they are that that adoption is real, despite whatever we thought was going to happen so it's, I'm enjoying kind of just we're on a sea that's got its ebbs and flows in this Evie narrative but love that troublemakers bringing us the Eevee news every day. So

Kyle Mountsier: 9:05

yeah, there you go. Right back to Speaking of fun rides.

Michael Cirillo: 9:10

Segue. Those people interest interesting one, tick tock her and car salesperson Ash has shed light on why some consumers might be hesitant to test drive cars at dealerships providing valuable insights for dealers. Ash warned consumers that they may form an emotional attachment to a car during a test drive, and take what she's saying take mental ownership of the car, which can lead to impulsive purchasing decisions. She also talked about how prolonged dealership visits might be a tactic to wear customers down and push for a quicker sale. Which sidenote, I think is interesting given how much conversation we've had about how to shorten that visit and how to streamline the sale but we'll talk about that in a minute. Yeah, some commenters suggested to test drive, leave and then research and negotiate room only to avoid high pressure sales environments. While some buyers see test drives as essential, others believe avoiding them prevents buyer's remorse, especially for used cars. On the comments,

Kyle Mountsier: 10:12

did you jump in on the comment I

Michael Cirillo: 10:14

did there? And they're split, right? There's some people that are like, I will never purchase a vehicle that I haven't test drove, right drive, drive driven, test driven, test driven. There's others that of course want to jump in and be like, yeah, gun dealers, how dare they keep us at the store for so long? But I mean, you have more experience in a dealership intricately, then most? What say you, Kyle, or was that a tactic, we don't really want to speed up the process. there for longer pause, there's,

Kyle Mountsier: 10:48

there's not a day that doesn't go by where dealers aren't trying to figure out how to get the process quicker, right? Like, maybe you've got a rogue finance manager out there, that's just really angry at the world that's going, you know, I'm gonna just take my time and, you know, get this deal entered into the DMS, you know, but that is so rare, because you think about it like, a dealer's Time is money. Right? If if a salesperson is caught waiting for hours trying to sell a car, that just puts them on in a place where they're not able to do follow up, find the next customer, all of the things that provide financial gain for them. So everybody in the dealership is constantly wondering, how do we do this quicker, both from the sales and the service perspective. So even if like, they haven't found the golden nugget, like how to do that, they're still in pursuit of it. surreal? I don't know if you know, if you know this little phrase, but it's a it's been a classic phrase and dealership, and the dealership we were on, and we'll see if you can finish it. For me. It's the feel of the wheel. Got Do you know it? It's the feel of the wheel seals the deal. And it is true. Like that is the real that's a major reason for the test drive. It's the emotional attachment to the car. It's the fun of driving. It's the joy. It's the excitement of the purchase process. And I don't think that's a bad thing, right?

Michael Cirillo: 12:14

I mean, this is what Apple does. This is why all of them, right? If you go into an Apple Store today, you will see one employee at that store going and pushing every computer monitor screen back to an unnatural angle, because the first thing they want you to do when you walk in is grab that computer screen and adjust it and get your hands on it

Kyle Mountsier: 12:33

right where you want it. Exactly, exactly. Yeah. I mean, I can't see a world where I don't know. I just think I think that the process of getting on a demo drive or test drive is maybe lackluster. And need some refinement. Right? Just some speed of getting there. But uh, gosh, people love driving the car. Yeah. And

Michael Cirillo: 12:56

I mean, maybe there's a sliver of the market that's like me that's a complete lay down that never test drive the vehicle because I've I've just at this point, I think it's because I've sat in so many already just go on and on and off lots but but for the most part, I mean, if we How do you marry or reconcile? Second largest purchase most people will make with no, I don't want to sit in it and make sure it's right for

Kyle Mountsier: 13:22

like what sliver of the market is just like that. I needed to go visit that home with a realtor. Yeah, no, you.

Michael Cirillo: 13:29

I mean, gosh, you have to see how that thing accelerates on a on a highway. You just do. Yeah, maybe it doesn't have enough especially

Kyle Mountsier: 13:36

a used car right? Yeah, just shimmy in the brake. Maybe you know all of those type of things. Yeah.

Michael Cirillo: 13:41

Well, maybe we gotta get ash on Auto Collabs and put them on as

Kyle Mountsier: 13:46

well bring it will bring you back in into the lab, but she did do a lot of really cool things, busting some myths that are out there. Hey, we're out here busting myths together, telling a better story about the retail industry which you all know and love. It's about more than cars.

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