The leasing industry is by far the largest source of one and two year old vehicles for the used car market, Armund J. Schoen, president of Four Wheels, Inc., Chicago, and a veteran lessor, declared at a panel discussion of the American Automotive Leasing Association at it's annual convention, M iami Beach, January 21-25. More than 100 leasing executives attended the convention.
Odometer Legislation and Warranties
Schoen emphasized that the current concern with odometer tampering legislation across the country by a segment of the used car business and some lessors must be tempered by the fact that the retail new car business will not generate enough late model used cars of varying mileage to affect the prices lessors generally receive for out-of-service vehicles. The latter are usually of higher mileage than non business type cars, although the leasing industry claims that better overall care of its automobiles indicates a greater used car value, not withstanding odometer readings. Schoen, as well as Bruce M. Hinlein, president of Chestnut Fleet Rentals, Inc., Upper Darby, Pa., and J. R. Selig, president of Car Lease Co., Inc., Milwaukee, Wis., emphasized that their firms have not noted a softening of prices, particularly in California, where odometer legislation has already taken effect.
On the other hand, Don R. Hyatt, chairman of the National Independent Automobile Dealers Association, another member of the AALA's Convention Used Car Panel, indicated that he favors a warrantied (and thus a lower mileage vehicle) used car for the highest possible resale value. He said that the prices he pays are determined by the number of warranty miles remaining. Hyatt's used car operation specializes in the larger type cars.
Hyatt's remarks caused David Spielman, president of Transportation Vehicles, Inc., New York, to state that he would suggest a special used car warranty for leased cars, to bo issued by the manufacturer, for a duration of at least 30 days, following inspection and a "pool" type payment. Spielman, also owner of a New York used car auction and a large Chevrolet dealership, pointed out that his experience indicated that used car buyers paid more for "in warranty" cars than for those where the warranty had expired, notwithstanding the basic condition of the vehicle. Representatives from all of the manufacturers were in attendance but had no comment on Spielman's remarks.
Hyatt told the group that the used car dealer will have to adjust to any national sealed odometer legislation by selling customers on the idea that the mileage does not necessarily reflect against a ear and that a high-mileage car that has-been well maintained is better than a low mileage vehicle that has been abused. Meantime, other lessors at the meeting suggested that the lessees should be made aware of any differences in used car values and .should be made to pay premium rates for high mileage usage.
Maintenance Lease Costs Rise
The convention heard AALA's consulting accountants, Michael Silver, Chicago, and Joseph Somers, Philadelphia, state that the cost of operating a leased vehicle under the usual maintenance lease went up 4.2 per cent in 1967 over the previous year to $112.99. This figure includes depreciation, delivery, make ready, financing, licenses and taxes, repairs and maintenance and administration, It does not include profit to the lessor. The average car in the AALA Cost Comparison Survey was in operation 21.2 months, with 79 percent of the vehicles Fords, Chevrolets and Plymouths. The Plymouth penetration of the AALA fleet increased from two percent to four per cent, the survey indicated.
Vehicle Insurance
In one of the most comprehensive reports ever made to an AALA meeting Elliott Kotzger, vice president, Chestnut Fleet Rentals, Ard-more, Pa., detailed his company's methods in setting op and operating its insurance department. The information was part of the AALA's Special Projects Sub-Committee on a possible insurance policy to be handled under the umbrellas of the trade association. In the report, Ketzgor emphasized the large deductibles necessary under the comprehensive and physical damage portions of such a policy. While AALA has not moved to support an association-sponsored insurance program, the committee's information is being evaluated for further action. At the association's September meeting last year, at least 30 AALA members indicated an interest in a single policy for the lessors.
EDP Accounting
One of the most enthusiastically attended meetings of the convention was the round table session on automated accounting, moderated by James Dodds, president, Fleet Leasing of America, Detroit. Pat D'Amato, Service Bureau Corp., New York, and Donald Hathaway, Reynolds & Reynolds Corp., Dayton, Ohio, demonstrated the capabilities of their respective system, and the lessors responded with numerous questions. While more than 50 per cent of the association's members now use electronic accounting, probably accounting for at least SO per cent of the vehicles under leased by the group, the obvious conclusion reached by the participants was that manual administration could no longer keep up with the demands of the business.
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