Chrysler Outlines Lease Program

Chrysler Corp. believes that within 10 years one out of every eight cars produced will be leased.

Robert D. Armstrong, president of Chrysler Leas­ing Corp., the leasing subsidiary of Chrysler, made the prediction at a program outlining the company's recent activities in the leasing field.

Armstrong made it clear that the future of vehicle leasing is bright and that Chrysler intends to be a "major factor" in leasing, operating through both di­rect lease and a franchise, network.

According to Armstrong, the number of new cars leased by major fleets increased from 125,000 in 1958 to 230,000 in 1962. Adding cars leased to small fleets and to individuals, about 300,000 units were leased in 1962. This represents approximately 4 per cent of all new car sales.

"This market will continue to grow," Armstrong said, noting that leasing currently is growing at the rate of 15 to 20 per cent a year.

"We believe that this rate of growth will level out at between 10 and 15 per cent a year as the base to which it applies continues to grow," he said. "This means that 10 years from now, one out of every eight new cars manufactured may be placed in service under lease."

LARGE COMPANIES DOMINATE

Armstrong came up with some interesting statistics on the size of current leasing companies. Of the 230,000 traceable by registration, some 185,000 units, or 80 per cent, were leases by 350 leasing companies. Each of these companies placed 100 or more new cars in service under lease in 1962. Less than 30 leasing companies placed more than 1,000 new cars in serv­ice last year, according to Armstrong.

"It is obvious that a rather small number of rela­tively large leasing companies took a substantial share of the total new car leasing volume in 1962," Armstrong said. "Almost all of the major leasing com­panies are, independents, not associated with dealer­ships. This is a natural condition because when a leasing company reaches a certain size the managerial and financial needs become such that it must be a separate organization."

Armstrong said that even with a large independent leasing company "problems of servicing accounts in other cities begin to compound themselves as the de­gree of geographical dispersion increases."

"In such cases it becomes difficult and costly to provide the quality of service which justifies leasing," he explained.

On the subject of direct lease-a point which has caused great concern among large independent leas­ing companies-Armstrong said that Chrysler has "an array of strengths which makes it possible for us to enter this market on a most forceful basis."

One of the "strengths" cited by Armstrong is "a well developed business relationship" with national major fleet operators developed by the company's fleet sales representatives "over a period of many years with an increased tempo in the past year."

"There are Chrysler Leasing Corp. offices through­out the country to provide local contact points for both sales and service to national fleet accounts," he continued. "The Plymouth and Dodge sales organi­zations have service personnel available in these same cities. We have the Chrysler dealer network to serv­ice and deliver new vehicles to major fleets, all in one city, or sections of the fleet in several different cities."

Armstrong declined to state how many cars Chrysler has placed in direct lease thus far this year. He did say that the company has signed contracts with 65 major national companies and that the com­pany should lease more than 25,000 ears this year compared with just under 10,000 cars last year. Again, he declined to break down the 25,000 figure into cars leased by Chrysler Leasing Corp. and ears leased by independent operators or by Chrysler dealers who arc not members of the company's leasing network.

STRONG POTENTIAL

As Armstrong pointed out, the Chrysler leasing sys­tem has the potential of becoming a major factor in the leasing business, especially in the area of direct leases. With a national dealer network and a national sales organization, a major auto company is in a position to possibly offer leases at a lower cost. Also, with ample resources, an auto company would not have to utilize a lessee's credit status to support a lease as is the case with many leasing companies. Armstrong stated that those accounts developed on a direct lease basis would not be assigned to dealers at some later date; and thus confirmed a major policy decision,

While Chrysler Corp. is the only auto company to announce a direct lease program, AUTOMOTIVE FLEET has learned that two other auto companies are considering such programs. They are Ford Motor (Jo. through its Ford division and Studebaker Corp. Ford wants to take a hard look at the Chrysler pro­gram before making any decision while Studebaker should be in the direct lease business before the end of the year. It is unlikely that General Motors Corp., which already has the largest share of the leasing market: and concerned about government at­tempts to limit its scope of operations, would enter the direct lease field. AUTOMOTIVE FLEET has been unable to learn the intentions of American Mo­tors Corp.

Armstrong said that Chrysler will have 100 li­censed dealers operating in 15 major markets by the end of 1963. The markets, in the order in which they will be opened, are Detroit, Chicago, Cleveland, San Francisco, Minneapolis, Newark, Dallas, Houston, Pittsburgh, Kansas City, Philadelphia, Los Angeles, New York, Boston and Washington.

Jack B. Sparkes, manager of Chrysler Leasing Sys­tem, said dealers will be selected "almost entirely from the Chrysler dealer network." Sparkes said dealers will be offered a fully competitive lease fi­nancing plan, a nation-wide insurance program, the counsel and guidance of competent, professional lease sales executives, a uniform identification program, an operations guide which provides an "authoritative foundation for establishing and conducting a leasing operation and an accounting system" specifically de­signed for a dealer-oriented leasing operation.

"The Chrysler Leasing System also provides a means of delivering vehicles to customers in other parts of the country through member licensees and a means of disposing of used vehicles coming off lease in distant points," Sparkes said. "Backing up these operations we plan to have well developed ad­vertising and promotion programs, both nationally and locally."

250 IS GOAL

Sparkes said that by the end of 1965, Chrysler hopes to have 250 licensees operating in the top 100 metropolitan markets.

While Chrysler intends to concentrate on Chrysler dealers, there are indications that Chrysler may sign up competitive makes as well as small independent leasing companies.

In fact, Chrysler has no aversion to leasing com­petitive makes of cars. Armstrong said that Chrysler recently leased five non-Chrysler cars to a company in San Francisco. The company had requested the cars and Chrysler obtained them from a dealer on a bid basis.

Armstrong said that the dealer network is being organized to develop local market lease opportunities because "we do not believe this particular market can be served adequately by our national direct leasing companies or by small local independents.

Concerning the disposal of vehicles leased directly by Chrysler, Armstrong said that vehicles sold during the model year plus three months-usually a 1.3 month period-will be routed through Chrysler Corp. dealers. After that, the vehicles may be sold to in­dependent or competitive car dealers. Last month AUTOMOTIVE FLEET reported that Chrysler has worked out an arrangement with the National In­dependent Automobile Dealers Assn. whereby NIDA members will be notified when cars are available for resale.

Armstrong said that Chrysler will continue its guaranteed depreciation plan "at least through 1964." He said that the price of Chrysler cars "has improved immeasurably" during the past year.