Sign of Things To Come? A Cut-Rate Prius Lease Program In Northern California
By John O'Dell December 11, 2008
By
John O'Dell, Senior Editor
It was only a few months ago that people who wanted to buy a Toyota Prius had to get on a waiting list and pay a premium price at many dealerships.
2009 Toyota Prius "Basic" model.
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What a difference an economic meltdown - not to mention $1.75-a-gallon gasoline - can make.
While still the world's most popular gas-electric hybrid, the Prius is now in plentiful supply all over the U.S. Annual sales through November were down 10 percent from the first 11 months of 2007, and November was the first time since January, 2007, that Prius sales volume fell below 10,000 a month.
Customers can even find bare-bones models that dealers wouldn't deign to stock this summer.
Bargain Rate
And in at least one region of the country, the cars are not only plentiful, they are selling - or leasing, in this case - at bargain prices.
That's right. You can actually lease a Prius at a discount, at least if you are shopping at one of the San Francisco (Calif.) region's 60 Toyota dealers between now and Jan. 15.
In what Toyota Financial Services spokeswoman Kerry Rivera says is a program not being offered anywhere else, the region's dealers are advertising three-year, 36,000-mile leases on the basic (or #1224) model for $2,999 in up-front cash and a $249 monthly payment for a basic priced at $23,375.
Options, extra mileage and the like would add to the cost, as with any lease, and the deal requires a premium credit score.
The cash part is about what a "normal" Prius lease demands, but the monthly payments, including tax, are $63 less than would be usual. "It's a better deal than the current standard lease," Rivera said.
So What?
Why, if you don't live in the area, would you care?
"It demonstrates how fast the pendulum swings in this economic climate," said Edmunds.com market analyst Jessica Caldwell.
It also could portend more such cheap leases, even discounted selling prices, for Priuses in other parts of the country as the national economic malaise continues - which it is expected to do for at least another six months.
The discount price would save a customer $2,268 over the life of the lease, nothing to be scorned these days.
Even if the economy starts picking up and gas prices start rising, Toyota dealers might be a little less likely in coming months to jack up Prius prices.
There's a new model due in 2010, and a spate of new, competing hybrids on the horizion, including the sub-$20,000 Honda Insight due next year and the Chevrolet Volt, expected to begin hitting the market at the end of 2010.
Building Loyalty
Dealerships that are thinking ahead might realize that capturing Prius customers now with easy-to-handle prices and lease payments is likely to keep them in the fold as the number of competitors increases.
That's the rationale San Franscisco Toyota's general sales manager, Russ Mobley, gives for the regional cheap lease program. "Our turn rate for Priuses is pretty good, but we did start seeing a little slowdown," he told Green Car Advisor.
"Leasing allows us to tap into what retail market there is, and we'd much rather make it advantageous to get into our product now, in a poor economy, so we have advocates looking to stay with Toyota and the Prius in three years, when there will be tremendous pressure by other automakers to get hybrids into the market."
"They particularly have to be fearful of the new Insight," said Caldwell. "They have long cornered the market for a unique body-style hybrid, and now there's a full-fledged competitor coming, and at a lower price."
Terms of the Deal
The lease program being offered by the Northern California dealers association is for a low-mileage lease: the norm is 15,000 miles a year and the San Francisco region's offer is good only for 12,000 miles a year, with a 15-cents-a-mile surcharge at lease-end for exceeding the 36,000 mile limit (unless extra mileage is negotiated in advance).
"But people in the San Francisco area don't drive as much as they do in other parts of the country," said Mobley, "so it's not an issue."
That may be - although we've seen an awful lot of commuter traffic between San Francisco and the Sacramento suburbs, a round-trip of 100 miles or more.
But even if a higher mileage is negotiated, the overall price would still be less with the base discount than if the consumer had started with a non-discounted lease (Mobley said the going rate for extra mileage negotiated at the start of a lease is 10 cents a mile, or an additional $25 a month for 15,000 miles a year).
Mobley said many of the customers taking advantage of the Prius lease program tell him they don't believe that gas prices, which have dropped more than $2 a gallon since summer, will stay low for long. They are trading in large cars and SUVs that are getting "15-16 miles per gallon," he said.
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