A Lease Is Forever...

"Leasing does not have to be on a two-year basis, or 26 months or for any specified period. My idea is that when we negotiate a lease it is to be forever. We work in that direction all the time."

That statement is how Ray Sadowski, general manager of Hillcrest General Leasing, Toronto, Canada, summed up his philosophy of operating a leasing company for Automotive Fleet.

Hillcrest is one of the largest independent leasing companies in Canada with wholly owned branch operations in nine major centers from coast to coast and its home base operation in Toronto.

In applying the philosophy of its general manager, it has gone its own way and has broken new ground as far as leasing businesses in Canada are concerned. For instance, one unique service it provides is its Courtesy Car plan for executives of companies leasing from Hillcrest.

"Anywhere we have an office, a travelling executive who is a client of any one of our lease companies can have a car for a very nominal charge for the first three days, and a slightly higher charge for each additional day," Sadowski explained. "A Toronto executive, for instance, can travel to Vancouver, pick up a car and use it for a full working week at a substantial saving for his company. This has proven to be a most effective sales tool for us and really means something to our customers because we have branches in the main centers where most executives are likely to be travelling."

The kind of imaginative thinking that led to the development of the Courtesy Car plan is apparent throughout the Hillcrest organization. Realizing that the selling price of cars at termination of the lease period was one of the serious areas of cost flexibility in the leasing business, Hillcrest created a special department for this activity with three full time salesmen located in the three major car market centers of Canada.

"I have just finished a study of depreciation factors for the different areas," Sadowski told us, "and the first year we introduced this policy of full time used car salesmen in the regions was the best year we had had from a depreciation standpoint.

"This is a plus factor for us," said Sadowski, "particular in a net lease (open end lease) aspect where the end result is the responsibility of the lessee. We are now able to dispose of almost all lease vehicles at a figure which allows us to return money to the customer. The only reason we can do this is because we have three experienced people who spend all their time disposing of these units. They do not know whether the cars are net lease or gross lease vehicles, all they know is that they are Hillcrest cars and it is their job to get the best possible price for them.

"Another advantage is that these sales people keep us in tune with the market," Sadowski continued. "Hillcrest is now far more sensitive to seasonal changes in the automotive market. We know when to dispose of cars to the best advantage. It is our experience that lessees are genuinely cooperative about keeping cars an extra month or so, or turning them in early, in order to enable us to dispose of them at the most advantageous time."

Sadowski feels that one of the reasons for his company's flexibility is the fact that it is a total lease company. He believes that this is the only way for an independent to operate successfully. "We have a certain versatility that other lease companies lack," he stated. "This is our whole concept. We will lease anything from automobiles to heavy equipment.

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"To be in the leasing business you have to be a total lease company," Sadowski opined. "The straight down-the-line lease concept may work for the dealer-oriented companies but that is not the direction we want to go," he said.

Sadowski believes that his company's future lies with its management lease plan. This is a combination gross lease and net lease wherein Hillcrest fakes over full management the fleet, including the supervision of insurance and maintenance. All billings are submitted to Hillcrest. All bills are fed into the IBM computer monthly and regular complete records are submitted to the lessee.

This is a concept relatively new to leasing in Canada and Hillcrest has been a pioneer in introducing it, according to Sadowski. He feels strongly that, "Unless a company is prepared to deal in this type of lease, they are going to find themselves out in left field." He adds, "Unfortunately, there are too many dealers who are in this business as another avenue of selling an automobile, and they are not prepared to take it beyond this point."

Hillcrest believes in the value of managing insurance for the lessee, too. "We like to manage if," he said, "because in the event of an accident it is important that repairs are done properly. We want the car in good saleable condition at the end of the lease.

"In addition, we are able to keep better records and to keep closer tab on the driving habits of individual lessees. It is important for the lessee, as well as ourselves, to be able to spot bad drivers, and we are in a prime position to do this before the man becomes a serious threat to a fleet insurance experience. Companies are completely aware of the increased costs that can be caused by drivers with poor driving habits. We find them to be most cooperative in dealing with these situations and seeing that they are corrected.

"With our insurance set-up," the general manager explained, "the bad record of a particular fleet does not affect the entire Hillcrest operation. If, for instance, ABC Company has an unfortunate experience, it does not affect the rate of XYZ Company.

"We consider insurance to be a very important part of leasing," Sadowski said. "Of course in some areas it is a very troublesome part. But we have our own insurance department and our own insurance people, and we feel that it is providing a valuable additional service to our customers."

Sadowski is convinced that as an independent, Hillcrest has I advantages. By not being tied to any one manufacturer, believes, Hillcrest gets better service from them. In turn his company can give its customers better service because it is exclusively a leasing company. He also believes that Hillcrest serves its customers better by having its own branch offices than by franchising operations in other cities.

"By keeping complete control," he pointed out, "we can assure our customers of the same service in every part of the country." This, Sadowski believes, makes his an ideal company for U.S. leasing companies or fleet operators to work through in Canada.

"We have a familiarity with Canadian laws and regulations," he stated, "and we are effectively spread out across the country so that we can serve each area properly. Instead of having to deal with five or six different companies in Canada, they can come to us and we can look after everything for them."

According to Sadowski, leasing is still in its infancy in Canada and the Canadian public and businesses are just beginning to realize that leasing is a valid concept. Pride of ownership is not as meaningful as it used to be, he contends, "but we still have a long way to go."

The Hillcrest spokesman continued, "Some people here have the misconception that leasing is a banking institution. It is not a way of setting someone up in business. Leasing is a tool for allowing an established and substantial business to expand and progress and not tie up lines of credit that it needs for inventory. It releases money for the purposes for which the business was set up in the first place. It allows companies to keep modernized without excessive capital expenditure.

"We are always working in favor of the customer-that's our philosophy," Sadowski said proudly. "In our opinion this is the only way to go if we are to stay in business and expand. Our prime purpose is to operate a leased vehicle as economically-as we can. Maintenance, buying, selling and insurance are all related to this primary purpose.

"We have had instances," he pointed out, "where companies have left us because of a substantial rate differential between ourselves and competitors. Later, they discover for themselves that our services are worth the extra cost and come back to us. That is a nice thing to have happen to you. It's all the justification we need to feel that we are on the right track at Hillcrest."