Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 1, 1994 TAG: 9402010057
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Chicago Tribune
DATELINE: CHICAGO LENGTH: Medium
In rolling past Honda, Ford offered a low-rate two-year Taurus lease. The scheme worked. Thousands of Tauruses were leased, and each was counted as a sale. Taurus wrested the sales crown from Accord and claimed victory over Japan for Ford and the U.S. auto industry.
But the clock has been running, and those leases are set to expire. The market will be flooded with low-mileage Taurus sedans, many still covered by the new-car factory warranty.
Ford said last week it has come up with a way to help dispose of all the iron that will swamp the market this year: a used-car lease.
While Ford officially refused to discuss the program, it acknowledged that its Ford Motor Credit Co. financing arm has begun to inform dealers that it will finance used-car leases soon.
The lease program apparently will be effective only on 1- and 2-year-old Ford and Lincoln-Mercury cars. About 250,000 were leased two years ago.
It is expected that the lease terms will be two to four years.
New-car prices have kept some people out of the market, but some cannot even afford the used-car alternative. Used-car prices have risen along with new-car stickers, as people who cannot afford new cars buy the less-expensive used cars. The increased demand has forced prices higher.
"A clean, used 1992 Taurus has a wholesale book value of $11,000 or more, depending on equipment, while a new one runs $16,000 to $17,000," said Lee Weinman, a Chicago Ford dealer.
Leasing makes a car more affordable, because there isn't a huge down payment, unlike with a purchase.
In addition to helping find a home for old Tauruses, used-car leasing eventually should help Ford sell new cars. After leasing a used car for two or three years, the consumer will be ready to replace that 4- or 5-year-old car with a new one, Ford officials said.
"Many used-car buyers graduate into new cars after two years, because their incomes and standards of living improve over that period of time," Weinman said.
After buying a new car, most owners are not seen in the dealership again, unless they are having repairs done. But leased cars eventually must be returned. Customers will have to visit the Ford dealership, where a showroom full of new sheet metal will stare them in the face.
With a large number of the used leased cars to be Taurus sedans, it is worth noting that in two years, when many of the cars will be turned in, Ford will bring out a new, second-generation Taurus.
"Just a coincidence," one dealer said, laughing.
Ford offered hefty cash incentives on Taurus, previously the industry's second-highest seller, to help close the gap with the Accord. Ford then reduced production of its Mercury Sable, Taurus' sister car, so more Tauruses could be built.
by CNB