The hot car in the nation's lease-rental industry is an intermediate-size model that will roll 21,563 miles per year during the 25.9 months it is kept in service by its original lessee. The popularity of intermediates has risen from 38-percent of leased fleet choices in 1974 to 44-percent in 1976, according to a tabulation of the 8th Biennial Automotive Fleet Lease-Rental Industry Survey.

Every two years since its inception, Automotive Fleet has invited a cross section of the country's leasing and rent­al firms to participate in a comprehensive survey of industry trends. For the 1976 survey, we mailed 3,309 question­naires to leasing and rental companies that range in size from the smallest dealer-affiliated operations to such giants as Hertz, Avis, Gelco and Peterson, Howell and Heather.

Completed survey forms returned numbered 520, or a 15.7-percent response to an industry poll that has been gaining in stature and reliability every two years since it was launched in 1962. The 15.7-percent response, in addi­tion to being particularly gratifying to the Automotive Fleet staff, is the highest return ever. Our last poll in 1974 garnered a 13-percent return. Market researchers normally consider a 10-percent return of such questionnaires to be more than adequate to identify industry trends - if those polled represent a cross section of the industry, as our sur­vey did.

To guarantee accuracy and avoid any chance of bias, our survey was mailed by Publisher's Reserve, Inc., a nationally- known market research firm. Those selected to receive the poll were culled from the Automotive Fleet mailing list, which is verified by Business Publications Audit, Inc.

The 44-percent choice of intermediates turned up in the 1976 poll compares with 43-percent of standard size mod­els, including low-price, mid-range and luxury cars, and a declining 13-percent of fleet choices positioned in com­ pacts. A downsizing trend is evident in the choice of car size compared to two years ago when 55-percent of the lease-rental fleets surveyed were standards. However, costs are up. When the first poll was taken in 1962, average cost of the fleet car was $2,790. Two years ago the average price recorded was $5,203. With no top limit in sight, the 1976 average dollar value computed out to an unprecedented $5,392 per car.

A total of 508, 313 cars made up the lease-rental fleets that our survey respondents had in service during the 30- day period the poll was taken (from mid-October through mid-November). Of that number, 91-percent were assigned to lessees with the remaining nine percent in daily rental use. Average monthly revenue per car, combining both lease and rental income, was $306. That figure shows a marked decrease from the 1974 high of $357 per month per car, but it remains well above the 1966 low of $190.

Once again, the Automotive Fleet survey found that fleet operators are the big lessees, with 82-percent of all leased cars going into fleet: use while the remaining 18-percent were leased by individuals. Of the various forms of lease agreements available,75-percent of the survey respondents' clients chose finance or management leases. Fixed or net leases accounted for 15-percent of the leased cars in service. The 10-percent balance were covered under the terms of full or partial maintenance lease agreements.

The ratios between finance, fixed and maintenance leases have remained relatively constant since 1970, when maintenance leases were written for 25.5-percent of the fleets. The best year ever for maintenance leases was 1968, when 36-percent of the survey respondents' cars were leased under such agreements.

How AF's 1976 Survey Compares With Previous Polls

  1976 1974 1972 1970 1968 1966 1964 1962  
Survey Return Percentage 15% 13% 11% 10% 11% 14% 11% 12%  
Is Company A New Car Dealer Affiliate?             
Yes 41% 38% 39% 39% 38% 45% 40% 36%  
No 59% 62% 61% 61% 62% 55% 60% 64%  
Average Age of Vehicles at Replacement (# of months)            
Leasing—Cars 25.9 24.3 25.2 23.7 23.3 22.9 18.3 20.7  
Rental—Cars 13 12.6 11.5 10.7 12.1 12.8 n/a n/a  
Leasing—Trucks 37.5 38.2 41.5 42.5 41.1 n/a n/a n/a  
Rental—Trucks 26.3 31.4 35.1 40.5 38.3 n/a n/a n/a  
Average Yearly Mileage Operated Per Vehicle             
Leasing—Cars 21,563 20,904 22,244 22,170 21,698 22,761 19,656 n/a  
Rental—Cars 13,907 14,361 14,424 13,513 16,207 15,924 n/a n/a  
Leasing—Trucks 32,489 30,484 37,159 36,853 27,717 n/a n/a n/a  
Rental—Trucks 22,222 21,421 28,148 28,000 24,082 n/a n/a n/a  
Compacts 13% 16% 8% 5% 3% 8% 10% 8.50%  
Intermediate 44% 38% 16% 11% 9% 9% 13% 1.60%  
Low Priced 14% 14% 28% 38% 29% 51% 52% 37%  
Middle Priced 21% 33% 39% 36% 31% 21% 20% 30%  
High Priced 8% 8% 9% 10% 28% 11% 5% 13%  
91% 87% 96% 90% 93% 91% 92% 85%  
To Fleets 82% 79% 78% 74% 82% 83% 62% 81%  
To Individuals 18% 21% 22% 26% 18% 17% 38% 19%  
9% 8% 7% 7% 7% 4% 7% 5%  
Finance or Management Leasing 75% 72% 76% 62% 56% 62% 76% 66%  
Fixed (Net) Leasing 15% 15% 13% 12% 8% 8% 11% 10%  
Full or Partial Maintenance 10% 13% 11% 26% 36% 30% 13% 24%  
AVG DOLLAR VALUE $5,392 $5,203 $3,987 $3,510 $3,221 $2,931 $2,441 $2,790  
$306 $357 $268 $241 $224 $190 n.a. n.a.  
97% 88% 85% 76% n/a n/a n/a n/a  
Under 10,000 77% 48%     n/a n/a n/a n/a  
Under 19,500 GVW 12% 22% 68% 54% n/a n/a n/a n/a  
Over 19,500 GVW 11% 30% 32% 46% n/a n/a n/a n/a  
3% 12% 15% 24% n/a n/a n/a n/a  
Under 10,000 44% 23%     n/a n/a n/a n/a  
Under 19,500 GVW 22% 29% 41% 49% n/a n/a n/a n/a  
Over 19,500 GVW 34% 48% 59% 51% n/a n/a n/a n/a  


As in past surveys, the majority of lease-rental opera­tions were found to be unaffiliated with new car dealer­ ships. Since the original 1962 Automotive Fleet poll, a near-60/40 relationship has been maintained between lease- rental firms that have no dealer affiliations and those that do. The current poll found 59.3-percent of the respondents operated independently of new car dealerships while 40.7- percent are affiliated with dealers.

The 1976 Automotive Fleet survey turned up a set of in­teresting comparisons between mileage and length of service that relate to leased cars and rented cars. Where the typical leased car is used by the lessee for an average of 25.9 months, the car in daily rental service enters the used car market after only 13 months. The rental car logs fewer miles, averaging 13,907 miles per year. The annual average mileage of the typical leased car is 21, 563 miles. Although there are fewer rental cars in service, their lower mileage tends to make them more attractive to used car buyers than the higher-mileage leased units.

As an industry, lease-rental operations are a relatively new phenomenon. Of those firms responding to our poll, only 34-percent were in the business prior to 1960. Reply­ing to the question, "What year did your company start in the leasing and/or rental business," a pioneering nine per cent listed 1949 or earlier as the year they opened for busi­ness. The years between 1960 and 1974 saw a whopping 63 -percent of the survey respondents breaking into the business. However, that trend dipped sharply between our last survey and the current poll, when only three percent of the firms entered the lease-rental market.

Like previous polls, the 1976 survey pinpointed strong growth trends in the leasing and rental of trucks. Out of a total of 151,680 trucks available for lease or rental by the responding firms, 97-percent were positioned in the lease market while only three percent were in regular daily rent­al service.

The most obvious growth trend in the leased truck mar­ket was recorded by pickups, vans and other light-duty machines. A surprising 77-percent of the leased truck mar­ket is composed of equipment under 10,000-pounds gross vehicle weight. This figure represents a dramatic increase over the 1974 survey, when 48-percent of the market was made up of trucks in the under 10,000-pound class.

Leased trucks in the 10,000 to 19,000-pound class ac­counted for 12-percent of the total, with 11-percent of the leased truck market positioned in the over 19,500-pound GVW class, results of the 1976 survey disclose. In rental trucks, 44-percent are under 10,000-pounds; 22-percent are in the mid-range, and 34-percent are over 19,500-pounds GVW. Our 1976 survey finds the average cost to the lessor or rental agency is $9,127 for each new truck added to the fleet.[PAGEBREAK]

The survey found that leased trucks roll an average of 32,489 miles per year during the 37.5-months they are kept in service by the original lessee. These averages com­ pare with 22,222 annual miles logged by rental trucks during the 26.3-months they are operated before being replaced. Two years ago, leased trucks were operated for 38.2-months before they entered the used truck market. Rental trucks were kept on the road an average of 31.4-months when our 1974 survey was published, representing a five- month decrease in use by the original owner in the ensuing two years.

Although the Eighth Biennial Automotive Fleet Lease- Rental Industry Survey represents the collective experience of professionals in the business, its findings point to several significant trends in client preference. For instance, the rising demand for intermediate-size automobiles among fleet operators suggests that General Motors made a timely choice when its five divisions introduced smaller 1977 models.

Economically, the increasing use of smaller cars may prove to be the fleet operator's best defense against the ever-increasing purchase prices the poll turned up. As for the popularity of light trucks and vans, the poll only con­ firms what our driving experience tells us: there are more light trucks on the highway now than ever before and the market saturation point appears to be some distance down the road.

Overall expansion of the lease-rental industry, that has demonstrated a steady upward curve between 1960 and 1974, may have reached a plateau during the past two years with our survey showing only three percent of the respond­ents entering the field since then. However, because the fleets themselves are growing markedly even if the number of companies starting in the business seems to be leveling off, we interpret those figures to mean more lease-rental clients will be the recipients of a higher level of profession­al service than may have been the case during the go-go years of the industry's expansion.

Insurance Tops Lease-Rental Industry's List Of Problems

Survey finds higher costs, government meddling also wreak havoc.

The major problem currently confronting the lease-rental industry is the skyrocketing cost of insurance, the Eighth Biennial Automotive Fleet Lease-Rental Survey discovered. A to­tal of 121 survey respondents, repre­senting 23-percent of our industry sample, named insurance premium payments and the difficulty in obtaining adequate coverage as the most signifi­cant threat to the industry.

"Insurance costs will be putting more rental operators out of business than the next five industry problems lumped together," one respondent wrote in reply to our question: "In your opinion, what is the major problem confronting the leasing/rental industry today?"

Making an interesting observation as well as a valid point, another lease- rental operator said, "We can take care of the nut on the wheel, but not the one behind the wheel. Insurance should follow the driver."

"Insurance, Insurance, Insurance," was the reply penned in on still another questionnaire while another respondent identified "Insurance in Spades" as the industry's main problem.

We presented these findings to Jo Dibbern, the able Liberty Mutual Insurance Company commercial representative headquartered in Des Plaines, Illinois. Dibbern's firm provides coverage for at least two of the nation's major lease-rental companies and she is conversant with insurance matters that relate to fleets.

Her thinking: "Lessors are in a bet­ter position to reduce their insurance premiums and more easily acquire cov­erage than operators of rental fleets because there are fewer drivers per car in leased fleets than in rented fleets. However, because of the intense com­ petition for clients, lessors frequently provide cars to lessees with little or no investigation of the driving histories of the individuals who will be operating the cars," Dibbern said.

"The best way to reduce exposure to loss as well as premium rates," Dibbern advised, "is to show the insurance carrier that the drivers of leased cars all have minimally acceptable histories. Good research is the basis for adequate leased fleet coverage at: the lowest cost," she reports.

"Obviously, coverage for rental fleets is a more complex matter because a given rental car may be operated by 200 or more drivers in the course of a year. Business being busi­ness, the first time a rental operator asks a potential customer to wait while his driving record is checked is the point at which the customer will walk down the street (or to the opposite end of the airline terminal) to rent a car from the competition. Until the day comes when rental companies are in computer communication with the various state agencies that record the driving histories of individual motor­ists, their insurance rates will exceed the national norms because their loss rates are demonstrably above average," Dibbern said.

"Self-insurance for collision may be the lowest-cost alternative rental fleet operators currently have at their disposal," Dibbern said. "Another option would be for firms serving the auto rental market to launch a public edu­cation campaign explaining that the small amount of time required to check a motorist's driving history would result in lower insurance expenses - and therefore, lower rental fees. Of course, wider use of computers would be essential for such a system to work," Dibbern concluded.


The second most frequently cited sore spot in the lease/rental industry is the rising purchase price of vehicles, coupled with the national rate of infla­tion. The average dollar value of lease/rental cars has gone up by $189 since our 1974 survey. By itself, that figure may not seem too unreasonable. But coupled with the fact that average monthly revenues per car have drop­ped $51 in the same two-year period, complaints about high vehicle cost and inflation take on a significance far beyond the 76 times they were mentioned by our survey respondents.

Among the 14-percent of survey participants who named high car prices and inflationary pressures as the lease/rental industry's main problem, a good number added the observation that clients are refusing to accept the higher costs in their bills, meaning many lease/rental operators are eating the higher expenses just to stay in busi­ness. One questionnaire carried this comprehensive lament: "Car prices are up. Inflation is rampant. Insurance companies won't insure us. Banks won't grant loans to us. The competi­tion is pricing us out of the market and the Government won't get off our backs. You tell me which is my most pressing problem."

Government interference in lease/rental activities was listed by 11-per­ cent of survey respondents as the field's major problem. Complaints about gov­ernment interference covered every­ thing from federal fuel policies (or lack thereof), through Federal Trade Commission stands on used vehicle dis­posal, to government mandates of in­terest rates.

One respondent cited the mountain of paperwork that federal and state agencies require of lease/rental opera­tors. Another hit the lack of enforce­ment of federal laws already on the books that could be used to slow down the car thieves who prey on rent­al operations. We think the deepest root of the problem was tapped with this cogent opinion: "The U.S. Government passes rules and regulations without benefit of expert advice and especially without thinking of the eco­nomic impact such regulations have on the lease/rental business."

Six percent of the completed sur­vey forms named competition as the industry's major culprit. A recurring line of thought among that group is that the bigger firms in the industry tend to establish price levels that they can live with because of their bulk buying power, but smaller operators lack that advantage and thus hover nearer the loss side than the profit side. One form carried this reply: "Dealers and other competitors who do not understand the business will muddy up the water for some years to come with their cutthroat rates and questionable advertising practices."


The difficulty in predicting future used car values was named as the in­dustry's major problem by four per­ cent of the respondents. Another four percent said interest rates and difficul­ty in obtaining financing represented the biggest threat. The banks in leas­ing controversy also attracted four percent of the survey respondent's ire as the main problem. Finally, the new lease accounting rules implement­ed by the Financial Accounting Stand­ards Board was cited by four percent of those polled as the major problem.

Other complaints included clients who take their time in paying bills, de­ lays in delivery of new cars, damage to equipment caused by clients, parking tickets accumulated by clients but paid by lease/rental operators, and dif­ficulties in recruiting and keeping qual­ified employees. One respondent came up with the quote to close on: "We al­ways have problems, but we always solve them."