In the 21 years Bob Gugino has owned Bison Automotive, he’s gotten used to seeing certain faces and cars pass through his Buffalo repair shop. But lately, he says, there’s been a lull in business.
The reason: auto leases.
“Certain customers who were coming don’t come in to see me anymore,” he said.
With set monthly payments, little money up front, low maintenance and the allure of a brand-new vehicle, more people are opting to lease cars, with the number jumping by almost 13 percent this year, according to Experian Automotive.
And with more people committing to three-year leases and continually cycling through new cars, there’s less repair work for mechanics – like Gugino – who are not tied to dealerships.
“It’s a trend. It’s not like the masses,” Gugino explained. But he added, “it takes customers completely out of my shop.”
Dale Schmigel, a mechanic at Dadswell Service in Williamsville, estimates there has been about a 10 percent decrease in his business associated with regular maintenance services. He also attributes the loss to the upswing in the number of consumers leasing cars.
The two local mechanics are not alone. The Automotive Service Association, a national trade group, reported that 35 percent of the independent mechanics surveyed noticed a decrease in the number of repairs per month and 38 percent noticed a drop in overall profits last year. The group estimated that automotive repair revenues grew by just 1 percent during each of the past two years.
Schmigel also said a lot of his customers who end up leasing vehicles assume they have to take their vehicle to the dealership for oil changes or tire rotations. He estimates that only about half of them know they can bring their leased car to independent repair shops for services.
But some dealerships, like Paddock Chevrolet in Kenmore, offer free oil changes and tire rotations at Chevrolet dealerships for the first two years of new three-year leases. Duane Paddock, the dealership’s owner, said drivers should expect “minimum expenses” for that third-year maintenance not covered by the dealership.
Schmigel understands why leases continue to grow in popularity.
“You walk in, sign your name – sometimes with no money down – and away you go,” he said.
Typically, the leases follow “36 months, 36,000 miles” or “24 months, 24,000 mile” agreements, Paddock said. Leases give drivers “peace of mind” because they know exactly what their car expenses will be, he explained. For some people, he added, it just makes more fiscal sense to pay $250 a month to lease, than $450 a month to own.
With the economic lows of the recession, Americans were leasing about half as many cars in 2009 as they were during two years previous. And the drivers who owned their vehicles were driving them longer.
But in 2010, leases began to bounce back and have continued to expand ever since. In the first quarter of 2012, leased vehicles accounted for 24.4 percent of all vehicles financed, according to an Experian Automotive report. Now, that number has grown to 27.5 percent – a record high.
“Leasing is the perfect fit for Western New York because it allows affordability,” said Paul Stasiak, president of the Niagara Frontier Automobile Dealers Association.
Western New York is a “sensitive market” he added, and people here are drawn to the stability of fixed, low payments. In 2011 and mid-2012, leasing really picked up in Western New York and the northeastern U.S. as a whole, Stasiak said.
For Glenn August, store manager for Cleve-Hill Auto & Tire, which has locations in Buffalo, Cheektowaga and Hamburg, 2012 “was definitely a challenge” in the face of the leasing spike. But he thinks this year, his business is starting to “get back on pace.”
Gugino said his car count per month is still down, but August has noticed an increase in his shop after a shaky 2012.
Last year, Cleve-Hill Auto & Tire served about 20 cars a day; in 2013, it has been about 25 cars per day.
Mechanics say they’ve noticed a “hands-off” attitude people carry toward leased vehicles. Some will avoid getting preventative maintenance, and August saw a dip in those services last year. But this year, he’s noticed an increase in needed repairs from his customers.
Leasing is a “double-edge sword” for August because he is also a seller and wholesaler of tires. If a lease driver hasn’t kept up with tire rotations, they will likely have to replace their tires in order to meet the requirements of the lease agreement. Drivers with leases should also be wary of exceeding their mileage agreement, which can tack on additional charges of around 20 cents for every mile over the limit.
Stasiak said he can see how mechanics may be affected by the lease surge, but leased vehicles have just changed the cycle, he said. Once leased cars are returned to the dealership, mechanics need to recondition the cars to be sold. He thinks that the lull mechanics are noticing will even out as cars that were previously leased are sold as used cars.
But for Gugino, the drop has been noticeable.
“It really hurts me,” he said.