For many years, auto dealerships in Maryland didn’t pay much attention to leasing. One reason was that Maryland charged some of the highest lease taxes in the country, which turned away customers. Updates to laws more than 20 years ago made leasing more favorable financially. However, many customers and salespeople remain resistant—especially because it still can be less expensive to lease in a neighboring state.
Such was the case when RRR Automotive Group bought Honda of Owings Mills in Owings Mills, Maryland, in 2016. At the time, the store’s lease penetration rate was just 8%, with an annual volume of 1,500 vehicles.
Today, Honda of Owings Mills sees lease penetration rates as high as 60%, making it Maryland’s top Honda dealership for leasing. Annual lease sales have nearly doubled, and customer retention is above the national average.
Abbas Khademi, part owner and vice president of the store, says its success in leasing is due to its strong staff buy-in, excellent customer satisfaction and the strength of the Honda brand.
“We want our customers to be happy. With Honda, it’s very easy because it’s a great vehicle, and it’s a great brand,” he says. “We want to sell people not just one vehicle, but every vehicle for the rest of their lives. And our leasing strategy helps us do all of that.”
Changing the Equation
Today in Maryland, there is no tax advantage to leasing, as there is in some states. Customers pay the same taxes whether they buy or lease. “When we were first challenged by Honda to improve leasing back in 2016, we had to find other ways to promote it,” Khademi says. “Honda’s lease cash programs allowed us to be more flexible on the price of the lease by passing on some of those incentives to the customers, and we were able to promote some of the benefits of leasing, such as not worrying about maintenance or repairs, or about having to miss out on the latest technology.”
In time, staff members began seeing increased customer retention, and they realized that leasing results in not just a sale today, but also a future sale with the same customer, often months ahead of their lease maturity. In addition, the vehicle coming off lease can become a Honda Certified Pre-Owned Vehicle (HCPV), offering yet another sales opportunity.
“We’re able to keep 99% of the vehicles that come in off lease for our HCPV department. In today’s inventory market, that’s a godsend,” Khademi says.
It didn’t take long for the sales staff to embrace leasing—not just for the sales boost and inventory benefits, but also for the increased customer satisfaction and loyalty. In fact, the store regularly sees customers who have moved as far away as Florida return to their dealership to turn in their lease and sign a new one.
“I thought it was just loyalty to the brand that made customers return,” Khademi says. “But leasing has definitely improved loyalty to the dealership.”
What once was a last-ditch effort to move a vehicle has now become the primary way Honda of Owings Mills presents deals to customers.
“They’ve made sure that their sales staff members understand leasing from start to finish so they can have the confidence to present it upfront to every customer and at every opportunity throughout the lease term,” says Michael Walsh, dealer relations manager, American Honda Finance Corporation. “They’ve just embraced the whole process because it helps the store, helps the customer and brings the customer back.”
AT A GLANCE
Honda of Owings Mills
Owings Mills, Maryland
There’s been a Honda dealership in Owings Mills, Maryland, for more than 30 years, but it became part of RRR Automotive Group in 2016. Abbas Khademi, part owner and vice president of the dealership, says, “It’s a beautiful facility in a beautiful location. We get customers from all over, including Baltimore; Pennsylvania; Delaware; Washington, D.C.; and New Jersey, and we have a true mix of customers from a variety of backgrounds and income levels.”
THE HFS DIFFERENCE
Honda of Owings Mills in Owings Mills, Maryland, has a winning leasing strategy, but Abbas Khademi, part owner and vice president of the dealership, says the store does its best to send every deal through Honda Financial Services (HFS).
“More than 90% of the new vehicles we sell are financed or leased through HFS,” he says. “Financing with other lenders really dilutes the products and allows customers to stray from the dealership and the Honda brand. The more we keep it all together, the better our chances are of holding on to our customers. Our customer retention rate of 55.7% is proof that it works.”