Lo Cost Financing Sells Cars Instead Of Leasing Will Owners Change Oil More Diligently?

LITTLE FALLS, N.J., Oct. 21 -- Motown's new "low or no" interest rates on new vehicles have changed the way cars, trucks, and SUVs are rolling off the showroom floor. Consumers are now opting to "buy and own" rather than leasing and returning their vehicles every two to three years.

Because of the nature of leasing, routine vehicle maintenance is not always a top priority for lessees. At the extreme end of the spectrum, some vehicles coming off lease have even been returned to dealers with the original factory-fill engine oil still in the crankcase.

All this may be changing, however, according to Kline & Company, a New Jersey-based consulting firm specializing in the petroleum industry. With low-interest or zero-percent financing, more drivers can enjoy the benefits of owning their new car as opposed to leasing it. But they must also accept the responsibility for properly maintaining the vehicle, including lube oil and filter (LOF) service.

According to data from the National Automobile Dealers Association (NADA), 2002 will be the fourth consecutive year of big sales for new cars and light-duty trucks. The projected 2002 U.S. sales of 16.8 million vehicles will be close to the 17.1 million vehicles sold in 2001, which nearly met the record of 17.4 million set in 2000.

This record sales activity for new vehicles means that sales of passenger car motor oil (PCMO) should at the very least remain at current levels. And with more vehicles being bought rather than leased, PCMO sales should increase even further, according to George Morvey, engagement manager for Kline & Company's Petroleum & Energy Practice.

"Car owners won't push the drain interval another thousand miles like they might be inclined to do if the vehicle was leased," says Morvey. "One extra oil change per year across even a relatively small percentage of the 16.8 million new vehicles projected to be sold this year translates into several million gallons of additional PCMO sales going forward."

Now that there will be more prospective LOF customers in the market, the big question to be answered is, Who will reap the biggest benefits? Will it be installers such as car dealers' service departments, quick lubes, and garages, or will it be retailers such as auto parts stores and mass merchandisers?

"Without a doubt, there will be no losers in these groups," says Bill Downey, vice president for Kline. "For the manufacturers and suppliers of PCMO, increased PCMO demand will bring more sales. For service providers like quick lube centers, general repair garages, tire stores, and others, it should translate into more LOF services. And for purveyors of engine oil at the retail level, it should result in more sales for the shade tree mechanic."

Increased sales of PCMO actually highlight the importance of building a long-term relationship with the customer, according to Downey.

"Because new vehicles are becoming continually less dependent on routine service, the only real routine maintenance required, at least for the first few years of ownership, is LOF service. But when consumers need new tires, brakes, or some other service as their vehicles approach middle age, the first place they look should be the service provider that has been doing the LOF service."

Established in 1959, Kline & Company is an international business consulting firm that offers a broad range of services to the petroleum and energy industries. Product rationalization, new product commercialization strategies, and brand management consulting are among its key areas of expertise. For more information on Kline & Company's capabilities in the petroleum and energy industries, please contact George Morvey at Kline & Company, Inc., 150 Clove Road, Little Falls, NJ 07424; at 973-435-3378; or via e-mail at george_morvey@klinegroup.com.