The average Mercedes-Benz in Orange County is kept for about three years before it’s dusted off and traded in for a new one.
That’s because most drivers lease, said Garth Blumenthal, general manager of Fletcher Jones Motorcars in Newport Beach.
At OC’s luxury auto dealers, leasing makes up about 70% of car sales.
“Leasing is just an alternative form of ownership,” Blumenthal said.
Leasing’s also big at Crevier BMW in Santa Ana.
“A car is a depreciating asset,” said Judy Ray, a new car sales adviser at Crevier BMW. “You buy what appreciates. That’s the general rule.”
The typical lease runs for 36 months, she said. Service and towing is included. Tires are not. Customers pay up front “out of pocket costs” of $1,200 to $3,000.
Expenses include the first month’s payment, Department of Motor Vehicles fees and bank processing fees.
Leases today are easier to understand, and all the terms are stated up front, she said.
“Historically, people were taken advantage of,” Ray said.
Customers with lower credit scores have an easier time leasing than buying, she said.
At the end of a lease, customers can buy the car or trade it in, assuming the mileage restriction hasn’t been passed. The limit is usually up to 15,000 miles.
“There’s always a mileage restriction,” Ray said.
The “residual” is the buyout amount at the end of the lease. It is based on miles, she said. Leasing helps feed Crevier’s used car business, Ray said.
Another advantage to leasing: It can be a tax write-off, Blumenthal said. Business owners can write off a percent of the monthly payments, he said.
Perhaps the biggest lure of leasing: Always getting to drive the latest model car.
“That’s a big factor, particularly in Orange County,” he said.
These days, lease terms are more appealing. Contracts used to be for five years, Blumenthal said. But automakers have realized that short-term leases are more attractive because it keeps customers coming back to the dealership, he said.
Automakers make money off lease payments. But for the dealer, leasing isn’t necessarily more profitable, he said.
Fletcher Jones has software that lets it know when it’s time to contact a customer about trading their car for a new one.
Jeff Cotton, in charge of Maybach sales at Fletcher Jones, developed the system, called “Auto Alert.” Cotton’s software is used at Mercedes dealers nationwide, Blumenthal said.
Down the road, 80% to 90% of customers will lease, Blumenthal predicts.
Bigger Tank
Scuba.com LLC, a seller of scuba gear, has moved from its Rancho Santa Margarita headquarters to a newly remodeled, double-the-size, 20,000-square-foot warehouse and showroom in the Irvine Business Complex. Owners Melinda and James Herndon bought the building from Logomark Inc., which moved to Tustin.
Scuba.com added five people for a total of 30. Everyone on the sales floor is a scuba diver, said Melinda Herndon.
Scuba.com began years ago selling scuba gear at eight stores. In 1996, it began selling online. In 1997, sales doubled. Same for 1998. By 1999, Scuba.com closed all but one of its stores and focused on Internet sales.
Scuba.com’s new store sells gear, fills tanks and rents out equipment. It recently sold spare air tanks to the military. The tanks are used for short and shallow dives. Scuba.com also sells gadgets such as underwater digital music players from H2O Audio in San Diego.
Herndon has a waterproof player.
“I love this thing,” she said.
Her underwater favorites: Enya and anything “spacey.”
Herndon’s thing is underwater photography. She said she’s excited about a potential new product,a rebreather. It eliminates bubbles that tend to scare away sea creatures and get in the way of a good shot, she said.
For every 100 people in Southern California, three to four are divers, according to Herndon. Some of the best dive spots in OC are Laguna Beach and Big Corona. It takes 40 hours of learning and $500 to $600 worth of gear to be a diver.
Downsized Danish
Danish Design Inc. recently relocated its headquarters and showroom from Irvine to Mission Viejo, downsizing from 4,000 square feet to 1,200 square feet. The furniture business, hit by China competition, has migrated online, owner Henrik Eriksen said.
“It didn’t really matter where we were,” he said.
Danish Design has been selling its mid- to high-end contemporary furniture online since 1997.
The only thing that’s difficult to sell online are chairs and couches, he said. People like to test those out. They can do that at the new store, which sells a variety of home and office furniture.
Ikea, which sells entry-level furniture, has created awareness of Scandinavian furniture’s simple and linear design, he said.
Eriksen came to the U.S. from Denmark in 1986 as an exchange student. He only had with him two suitcases and $200. He travels to Denmark every year, where he said business moves at a much slower pace. In 1995, he opened the Danish Design showroom in OC.
