In the analysis of non-ownership decisions in the automotive industry "non-ownership" must first be defined. Non- ownership is simply referring to a leasing type of contract, this type of a contract allows for consumption without ownership. Traditional purchase, cash or financing, the consumer holds the title to the vehicle, while in a leasing contract the automobile manufacturer holds the title. Therefore the leasing contract is "non-ownership"; this comes with many benefits that motivate customers to make this decision; but not all customers are motivated by the same reason. The two general types of motivations are utilitarian, tangible or financial motives, and hedonic, the pleasure motives, (Trocchia, Beatty, and Hill 2006 p306). Based on these types of motivations customers choose their contract type and the responsibilities that surround it.
[...] The Cadillac had an increase of in purchase and lease. The Lincoln a increase in purchase and a increase in lease. All vehicles in this study had a higher increase in purchase due to the rebate, but the margin between lease and purchase was the lowest in these two brands, because of their projected maintenance costs. While examining a vehicle known for reliability, Toyota Avalon, this vehicle showed the least amount of leasing increase with a .9% and a in purchase increase, this was the lowest margin of all vehicles examined (Dasgupta, Siddartha, and Silva-Risso 2007 p498). [...]
[...] Segmentation Consumers were broken into five clusters based on responses to various questions regarding motivations, during and after the purchase process; these are based on the five broad desires outlined in the deconstruction. (1)”desire for simplified maintenance” “desire for variety” desire for gratification from physical comfort” “desire for gratification from driving excitement” and “desire for social approval” (Trocchia, Beatty, and Hill 2006 p307). The five clusters were characterized into these groups for easier visualization. First, the “Budget Gourmets” consisting of younger, lower income individuals who enjoy variety, gratification from driving excitement and desire for simplified maintenance in their vehicles” (Trocchia, Beatty, and Hill 2006 p310). [...]
[...] Leasing more vehicles is a strategic advantage for new car dealerships, as it brings customers back in to the showroom years before purchase customers, this increases sales, and reduces customer churn (Harris 2007). Understanding consumer motivations regarding purchase method and your product is an important step in the long term success. Works Cited 1. Baxendale, Sidney J. and William D. Stout (2006) “Auto Lease vs. Purchase: Guidance for Business Owners” Practical Tax Strategies Beltramini, Richard F., and Patricia S. Chapman. (2003) "Do Customers Believe in Automotive Industry Rebate Incentives?" Journal of Advertising Research: 16- [...]
[...] The differences were found in income level, people belonging to the highest income bracket made up twenty four percent of the lessee's while people belonging to this same bracket only made up ten percent of the financers (Trocchia, Beatty, and Hill 2006 p308). Some explanation of this may be a result of tax or cash flow benefits from leasing; higher potential cash flows make non-ownership a financially attractive option. Only paying for a depreciated portion of your vehicle will free up cash flows for other investments (Baxendale and Stout 2006). [...]
[...] Maintenance However a significant benefit in the maintenance costs is illustrated in leasing. For the first three years the maintenance costs of both vehicle purchase types are the same, roughly $500 per year. After year three, when most vehicles would be out of manufacturer warranty, the financer will be paying roughly $1500 dollars on year four, $2000 on year five, and $2500 on year six (Dasgupta, Siddartha, and Silva-Risso 2007 p493). The standard cash outflows analysis for new vehicle purchase shows that costs associated with financing are significantly higher in the first two years, eventually leveling off in the third year, and declining to zero in the fifth year. [...]
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