The Car Leasing industry (valued at $594.6 Billion as of 2023) is a vast market but is slowing down to due various challenges in the current process.
In this blog, we will talk about the biggest challenges in the car leasing industry and how AI can help overcome them.
Let’s dive in!
1. Customers’ changing preferences
The average customer’s mindset has evolved in the last few years, and hence new car shoppers aren’t opting to lease cars anymore.
The rise of car subscription services which allows customers to own a car with a convenient monthly subscription is causing users to move away from leasing vehicles as the former option is a lot more affordable, convenient, and doesn’t force a long-term commitment.
Given how the customer’s preferences are changing, it is necessary for car leasing companies to adapt their business to their customers’ needs in order to thrive.
2. Vehicles’ declining value
Vehicle depreciation is another big challenge for the car leasing industry because in many cases, the resale value for the vehicle ends up being lesser than the residual value.
When you combine this with the non-flexible contract terms of car leasing companies, and the reluctance to lease out used cars, it causes huge structural and financial problems for the industry.
The only solution to this challenge is that car leasing companies adopt more flexible options to attract more customers and mitigate losses.
3. Rising interest rates
Car leasing companies buy vehicles via loans from banks and other financial institutions. Due to rising interest rates, companies have to deal with higher borrowing costs, which eventually leads to increased operational expenses.
Car leasing, which has been a novel way for customers to own high-end vehicles without having to pay a premium price, is slowly losing its charm because of the rising interest rates, which forces these companies to charge their customers a higher price in order to maintain profitability.
This increase in price causes them to repel customers and lose business in the longer run.
4. Poor record keeping
Keeping proper track of financial records is crucial to run a successful leasing business because they help companies identify trends early on and minimize losses.
In many cases, leasing companies are forced to shut down because they didn’t manage their records properly, which results in them ignoring risky clients, and losing a lot of money in the process.
However, by implementing the right software solutions to digitally track and manage the company’s financial records, car leasing businesses can easily avoid this problem.
5. Low customer satisfaction
Given the above-mentioned challenges, the customer often ends up facing the brunt and hence, is left unhappy with the entire car-leasing experience.
Converting an unsatisfied customer is highly unlikely unless you give them a delightful experience during the leasing process. One option would be to use the power of digitization and automation.
For example –
A lot of car leasing companies are opting for AI-based vehicle inspection solutions like Inspektlabs for automated damage detection. This helps in
Increasing the efficiency and speed of an otherwise labour-intensive process.
A thorough inspection with a standardized process, which helps improve the vehicle’s overall safety.
Saving time, money, and resources which can be used for other important business tasks.
Creating a novel experience for the customer, which in turn results in improved satisfaction, retention, trust, and transparency.
Learn more about how Inspektlabs’ AI-powered damage detection system works.
Conclusion
The car leasing industry is slowly declining due to customers’ changing demands, increasing interest rates, unpredictable depreciation values, and low customer satisfaction.
While the market is huge, the ignorance towards these challenges is causing a bigger impact, leading to the downfall of the industry.
Some quick and easy steps to help solve these challenges include better record keeping, digitizing the traditional process, and using AI for automating vehicle inspections.
Failing to adapt to these changes and catching up to the trends will eventually lead to the death of the industry as a whole.