Ed Bobit's Publisher's Page

"The merchants, however, are the biggest fools of all. They carry on the most sordid business and by the most corrupt methods. Whenever it is necessary, they will lie, perjure themselves, steal, cheat, and mislead the public. Nevertheless, they are highly respected because of their money. There is no lack of flattering friars to kowtow to them and call them Right Honorable in public. The motive of the friars is dear enough: they are after some of the loot." Desiderius Erasmus: The Praise of Folly, translated by Leonard F. Dean, 1946. (The Folly is speaking.)

How about a wrong kind of a Christmas present? What we call a bummer or better still, a genuine rip off!

You have got one in store for you. You know about it. You sat in silence while it was happening trying to evaluate the ethics of turning your head at an illegal practice by someone else and the fact that it would ultimately cost your company a hellleva lot more money.

What we are talking about is what everyone is talking about; the new odometer law that is completely outlined within this issue as a matter of congressional record.

Specifically because of its impact upon the industry as a whole, I have been questioning the so-called experts in the field (as we all know, the leasing company's used car departments and the factory men have all the answers), but I fail to find a unanimity of thought about the future. They all agree that there will be a costly impact. But I ask "how much;" and "how long" before it settles.

It is understandable that no one can accurately predict the total outcome of these two questions. But here is the best recap that we at AF can give to you toward the immediate future.

First of all, prepare your management for a sizeable increase in your operating budget for 1973. Maybe somewhere between 15 and 20 percent; that is on your recycled cars. At this writing, we are still not sure about an increase at GM and Ford on the new car purchase cost; and that is running about 50/50 at the moment for another $50 to $75 on the new ones. You already know what it is for Chrysler and AMC cars.

With the penalty attached to the new odometer law that takes effect on December 27, even the most suspect used car buyers from Kentucky, North Carolina and Texas will tell you frankly that the only clock they reset is the one in their bedroom or kitchen. No one is going to wink at this one, even with the monumental cost consequences.

So what is really going to happen? We can look at California where it all started. It took nearly two years for the dust to settle and for the market to be "predictable." Because it is now national in scope we feel that it will take a year or so to adjust to this new influence. And it is going to be a costly year for the high mileage cars. The low mileage fleet cars are going to command a premium but the two year old, 70,000 milers are going to go begging. At least for a while. And the high milers are going to force a few other things.

Like leasing companies that suddenly increase rates for the big numbers on the clocks — substantially (on the closed end leases). Companies will immediately re-evaluate the personal mileage aspect of an employee's total mileage. Reconditioning will emerge as a possible salvation to those "dogs" that can be reincarnated into at least desirable units no matter what the odometer reads. Fleet managers are going to take additional steps to educate drivers on the care of the units. And there will be leasing companies coming up with plans for earlier recycling of cars that consistantly travel the big miles. In spite of this you can still count on a $200 to $300 loss on those high milers. Put that into your budget and see what it means!

Now, a little of the big picture; and why it should adjust itself more quickly than we all might think (it still will be costly). And to use a little editorial privilege in rounding off some numbers . . . With about 9,000,000 new cars sold each year; and let's say that 8,000,000 have trades; and the average American motorist registers 10,000 miles per year and the average age at replacement is 5.66 years (these figures are pretty accurate); you find that the average new car trade (non-fleet) is in the vicinity of 55,000 to 60,000 miles. But they are five years old.

The one million plus fleet cars sold each year virtually all have trades, and they are about 24-months old. Now do you see where the premium is going to come for the low mileage two year old car versus the high mileager. And with all the clock resetting, the public (without knowing it) is suddenly going to find it difficult to find that 'fresh' two-year-old car. Ahem.

In anticipation (perhaps) and as a result of this incidence of new cost the fleet managers and lessors have turned to the intermediates for lower initial cost (and the same size as were the 'standards' five years ago) and the latest figures show that the intermediates are now out-registering the standards for the first time (21 percent versus 20 percent). And the trend is gaining strength.

Any fleet supervisor who does not meet this problem head-on, and gives his management a full report for '73 budgets, may want to consider some other line of work. It's happening. Now.