Overseas, car-buyers are increasingly turning to leasing when it comes to getting a new vehicle. More than a third of all American new-car owners leased rather than bought in 2016, according to the Associated Press.
There is also “an increasing amount” of leasing and hire in the UK and Europe, says Murray.
But it is difficult to get exact figures when car finance and car retail is increasingly intertwined. Renault Finance and Volkswagen Bank, for example, are the financial arms of the car retailers, and provide hire purchase and leases.
VW car leasing deals typically sign customers up for three years, with the chance to upgrade to a new model – and another three-year contract - at the end of the term.
This is the norm among North American lease customers and it’s happening “a lot more” in Europe, says Murray. The alternative is to hand back the keys, losing the deposit (which can be up to 30 per cent of the full car price).
“They incentivise people to enter agreements and it’s generally a lot harder to exit those agreements: the three years are up and then you say look what do I do, I’ll go back into the agreement again, I’ll go with a new model Volkswagen… it is basically a loyalty-generating proposition.”
VW’s additional value-added offers like insurance, service costs and even fuel make it even more attractive to consumers. A regular, monthly charge that covers all those things becomes “so convenient, so easy, so user-friendly for consumers, [the car retailer is] actually blurring all the boundaries between the issues of price and value”.
Leasing in many sectors – be it cars or phones - has traditionally been aimed at the B2B market. Murray says that, in the States, retailers first encouraged consumers to get into car leasing in a difficult trading environment, post the global financial crisis.
In the mobile phone space, consumer leasing appears to be taking off in markets where revenue growth has plateaued, and mobile players are now targeting individuals.
Leasing has become commonplace in the US since telco giant Sprint introduced its ‘iPhone for Life’ promotion in 2015. Carriers in other markets, such as South Korea, Singapore and Australia, are also offering leasing plans.
Mobile phone leasing gives customers the latest phone for a similar cost “at or within 10 percent” of the average post-paid plan costing $40 a month, says Quantiful managing director Alan Gourdie.
Many telcos offer add-ons such as insurance, cheaper repair costs, as well as a brand new replacement when phones are broken, lost or stolen. When one Australian carrier launched two years ago, he says, “a very large chunk, 40 to 50 per cent of all new contracts [were] leasing, because of those benefits”.
Quantiful, an Auckland-based precision marketing and data insight company, is working with Kingfisher Mobile, which provides leasing solutions for telcos around the world. Quantiful most recently worked with Kingfisher and a Phillippines telco Globe.
Quantiful is also an agent for Kingfisher Mobile in New Zealand, and has helped the company with market insight, including analysing consumer perception of leasing.
It also helps Kingfisher design and test propositions – for example, whether a lease deal should be price-based or value-add based (with an annual upgrade, insurance and so on).
Leasing is not currently available to New Zealand mobile phone customers but it’s close. Over the next 12 months, Gourdie says, “you’ll see at least two, if not three, of the major carriers considering leasing… it’s a very active space”.
NZ Retail understands that at least one major telco is on the verge of offering leasing deals to local customers.
Quantiful also provides forward projections for likely uptake. This allows the carrier, which has to buy the phones from Apple, Samsung and other manufacturers before transferring them to the leasing companies, an element of ‘demand control’.
“What of course happens when you introduce leasing is that you get a significant change in your mix. You get significantly more premium devices because suddenly it’s accessible for a much larger group of consumers to have a more premium device.
“We provide the planning and ongoing forecasting for that consumer behaviour leading into a sales forecast, which in turn is then used to optimise their supply chain planning.”
Could this have helped retailers when the iPhone X came out, and its unpopularity caught everyone by surprise? Many were left with a surplus of expensive stock units sitting on the shelf.
Gourdie is diplomatic: “That has been one of the more modest launches, it didn’t knock it out of the park [but] generally speaking it’s going to be easier for planning purposes as more and more of your customer base moves onto leasing.
“Their behaviour is likely to be more predictable if they’re getting an annual upgrade and it doesn’t cost them anything, all they have to do is hand their phone back, there is a degree of predictability.”
Leasing customers don’t have to upgrade, but most do, he says.
Another reason why the leasing model works well for retailers is the residual value on the phone. If an iPhone is handed back and sold on after one year, the lessor should make 60 per cent of the original purchase price back. These pre-owned devices are sold into markets like China, India and the Phillipines, refurbished and boxed up as new.
Back at Boltra, founder Ella Keegan, who is also strategic marketing manager at Xero, says that she is often asked whether the subscription model is “a viable strategy”.
The main concern, she says, is that it can take too long to develop revenue. “Depending on the offer and the business structure, this long-term revenue strategy might be a viable option for some but it is quite a change from a traditional retail store which most electric bike stores operate under.
“It suits us and our customers, and monthly cash flow allows us to grow and reinvest in the business.”
Because Boltra offers ‘cancel anytime’ subscriptions, its service “needs to be great - and that's not even good enough”.
“We think about every touch point with our customers from visiting our website - to canceling and returning their bike.”
This article has been updated to reflect a change requested by interviewee Alan Gourdie, who initially referred to the US and Australia when speaking of the popularity of leasing contracts. He intended to refer to one Australian carrier only.