It is a little-known fact that leasing, hiring and renting had it starts in the transport industry as far back as the 1700’s in the United States. This leasing mainly revolved around the leasing of horses, buggies, wagons, and stabling but later evolved to include other forms of transport including barges, locomotives or railroad cars and other equipment.
But it wasn’t until the 1940’s that leasing began in the real automotive industry. However, these early leasing agreements mainly involved fleet rentals and were rarely open for public consumption. The initial leasing arrangements were all inclusive meaning that the lessee was responsible for maintenance, repairs, taxes and all other costs associated with the vehicle.
In the 1960’s, car leasing became more open to the general public with the structure being more affordable than the purchase of a vehicle. Leasing was mainly available from airports and car rental agencies.
The current auto leasing structure that we are more familiar with can be largely attributed to Eustace Wolfington. Not only did he come up with the idea of leasing to the public but he designed the leasing agreement that made the concept both affordable and desirable.
Consumers at the time were in the habit of purchasing a new car every two years, selling the stripped down vehicle to fleet companies after this period had elapsed. However, the finance period was four years for the same car. If the resale value did not cover the remainder of the outstanding car loan, the purchaser would still need to keep paying.
Wolfington came up with the idea to ensure that the car finance terms could be made affordable over the desirable two year period. Instead of the consumer paying the full cost of the investment, they would only be responsible for half that amount, and the car dealership would be responsible for the other half. When the two year period elapsed, the car would be returned to the dealer who would sell it to cover the costs of the finance and make a profit.
His next step in influencing the car leasing industry was to introduce renewals. Instead of only returning the vehicle when the two year period had expired, the lessee could opt to continue driving the vehicle or choose a new car from the same company at discounted rates.
This stopped customers from going elsewhere for their leasing requirements, essentially tying them into a leasing agreement on a long term basis.
While some changes and developments have taken place since Wolfington’s initial introduction of car leasing, the structures remain very similar today. However, different leasing agent Worldwide Automobile does apply variations of the same principles to provide for consumer needs and ensure that they become long term customers.
Car leasing to fleet companies is still the greatest market for this type of arrangement in the United States. However, recent surveys have revealed that leasing to the public can now be attributed to around 23% of the automotive consumers.