Alright, I guess we got the basics covered. Now we can go really into the details.
What you also need to know about car leasing.
Original equipment manufacturer (OEM) like VW, BWM & Co. are just companies that want/ need to make money. In fact, they are huge companies with thousands of employees. And what do all of those employees want? Right! They want their money at the end of each month. Just assume how much money an OEM might need to spend every single month to cover the running costs they have. Paychecks, materials, rent, electricity, heat, compressed air and the list goes on and on. Therefore, an OEM car production line is not supposed to stand still, not even for a minute or two. The more car’s they produce, the more money they will hopefully make.
But where is the connection to car leasing? Car’s are getting more expensive year by year. This is a trend we can clearly see, but as the prices go up, who is supposed to be able to buy a new car anymore? And that’s where the leasing market kicks in. Instead of stopping the production line and losing a ton of money while doing so, they would rather produce cars that are not going for sale, but instead are going to be leased by customers. Meaning that the production facility is getting their money for the car right now and right here on the spot and a financial institution works out a plan, how to get that money back from the customers later on in time when the car is getting used.
Well, whatever! No! Not whatever!
If you know how they play the game, you can play with or against them. The only question is, how?
- If an OEM is producing a certain car for a certain amount of time and announces a new model coming up soon, nobody will buy the old car. Why? Because they can wait a couple of months and get the new one instead. Therefore, the demand of the old model decreases, resulting in a potential production line stand still. But, as we learned already, this is the worst thing in the world for a car manufacturer. Therefore, the OEM is trying to prevent this from happening under any circumstances. And how? Well, that’s an easy one. They will offer you guys special deals. The OEM will subsidize the leasing offers in order to still being able to produce the old car. And that’s the moment when you can get a huge discount on your car.
- But not only the old model may cause such problems, also the new model may struggle a bit to get the right amount of orders the production line really needs. In this case, they are going to do the very same thing. The OEM will subsidize the leasing of their new model in order to have a constant demand of cars going to be produced on the updated production line.
But not only the OEM plays a part in this game, there are also other players trying to get the best out of the situation. For example the government. With the diesel gate scandal a couple of years down the road, todays car related politics are focusing on the “future of mobility”. Electric cars, hydrogen powered cars and hybrids. We hear words like environmental friendly, or reduce CO2 emissions and stuff like that. But those new technologies are really expensive. Expensive to develop, expensive to produce and most of the time having a huge disadvantage in their daily usability, at least compared to the average everyday car. And so, people are not going to buy an electric car. Why should they?!
But the thing is, the OEM’s are forced to reduce their CO2 emissions due to the current environmental friendly legislation. But how can they reduce their emissions? By producing hybrids, electrical cars, etc. But if nobody orders such a car, the OEM’s have a problem! But not only they. The government as well, therefore, the government is also subsidizing the car market. For example with the current “Umweltprämie” environmental bonus in Germany. If you are going to lease an hybrid or electric vehicle these days, you get 4500€ from the government for that! If you buy one, you get even more!
But sure, we all know that you are not supposed to buy an electric or hybrid vehicle these days. At least not with the current state of the art battery systems. But, as you can see, leasing a car doesn’t need to be expensive all the time. You just need to get the right deal at the right time and make the best out of your situation.
See you next time!