The automobile leasing business knows there is a problem with leased vehicles that have a lot of miles. You still need to be able to sell them, to get a good return for yourself and your customer. What's the answer? One answer, we hope, should be shorter leases. Shorter leases, I feel, are a must for the industry.

But what is high mileage? To some of us, it's 20,000 miles a years, or 25,000, or 30,000. The ultimate mileage number that I would like to see is a vehicle that would be sold at the end of a two-year cycle with less than 45,000 miles. That car can be marketable. But how do we achieve that for our customers? It's very, very difficult.

We all know of leases that are written for 24 months and 50,000 miles with $.02 excess or even less, or 60,000 miles and $.02 over. Some open-end companies have particular fleet accounts that have kept cars 75,000 or even 100,000 miles. Consequently, you're going to have a very hard job of selling your customer the concept of lower mileage, lower maintenance, and higher costs. But it's going to come out now or later. So I think that it's one of the major problems that we're confronted with today on a business lease.

But is 45,000 miles an attainable plateau? If not, what is the next attainable plateau?

Many of you probably feel you're going to have client resistance in selling this concept. And the reason is that you're going to have competitors out there who are going to write longer-mileages leases, allowing customers to drive cars longer - with lower monthly payments up front.

If we're going to market automobiles and stay in this business we need to remember that we are very dependent upon a particular segment of the market that we no longer want to talk about. It is like Prohibition: when you went to a speak-easy, you could go in easy and get out easy, but every once in a while, there was a raid. Well in our business, the major raid has occurred.

There are no longer all 32,000-mile two-year-old cars going through the block. So that's why I think there's a tremendous problem ahead of us. A lot of us are locked in on leases for this year, next year, and the year after. So how are we going to solve the mileage problem? It's up to all of us. Because if we're looking at 55,000 miles, that means somebody's got to pay. In open-end, they're going to pay more because they're going to have a higher depreciation factor, therefore less on the back end; and sales people are going to have to work harder to sell that concept. Will it work? We'll find out at the next meeting.

But the question of rates remains. We all have different methods of determining how we make money in leasing. The easiest way to make money is to get enough money from the lease. And I'm not talking about brokered leasing. Rate reflects profit. The more you get, the better off you're going to be. But the tougher it is in the marketplace; because when you finally feel that things have settled down, there's always a new person on the block to interrupt your flow, solicit your customer, and offer him a better deal. So you have to retrench. I think this is the year when we're probably all going to have to work harder than we've ever worked in our lives... and probably make less money.

I think there has also been a shift in consumer philosophy: one philosophy is that the consumer is a monthly-payment buyer, period. "Get me out on the street with wheels. What can I get for $189 per month, and I don't care if I own it or lease it. I just want to pull into my driveway, because I've been buying all my life and leasing from the bank and never knew it."

But one point we want to examine is whether that customer is using up a used car. Meaning, why should he pay $145 per month on a used Escort when he can lease a brand new one for $149? What's happened to the used-vehicle market because of changes in the overall consumer philosophy?

We are looking at the fact that there could be a problem developing in marketing used, two-, three-, and four-year-old cars in competition with the consumer leasing. And if you're in an area that has not had consumer-lease prices advertised, just wait a few months; it won't take long.

Another topic that we need to be aware of is the brokered lease. I vote that the consumer lease broker is here to stay, now and forever more - unless the tax laws change and the banks don't have the accelerated depreciation and the ITC to serve them. We were talking earlier about guaranteed residuals as published in the booklets. Now this booklet says they're going to buy a car back for $7,200 with a guaranteed figure. It doesn't matter whether that's a "real" value or not as long as these people are in business and they've got a checkbook.

Another topic we should be concerned about is look-alike cars. I think one of the problems in the automotive industry, as one of our speakers said yesterday, is that we've got too many cars. In 1986, we're going to have four Pontiac 6000s to choose from. Now they're excellent cars, but it's going to make our jobs either harder on our selector lists or easier on our selector lists - depending on whether we're leading the customer or the customer is leading us. So I think that we should also look at economics. Is it really necessary for the manufacturer to build so many cars that look alike?

And if we didn't have enough problems this year, we had problems with availability. I think availability problems with certain engine/transmission combinations will be with us next year also. But we need the manufacturers to tell us. Because one thing I detest is selling the lessee three times. First you sell him on the rate; and you get beat up, and he gets beat up. Then you call him back five weeks later and say, "Your car's still delayed, and by the way, we have to switch to this transmission to get it built." Then he says "I don't need that transmission, so I'll take the four-cylinder instead." So you've waited six weeks, and you then start over. You've got another six-week wait, and in the meantime he's got two more prices, and the mileage has gone up on his used car, and he wants you to underwrite the difference in the maintenance costs between 55,000 miles, when he was supposed to recycle, and 81,000, when he just blew the engine.

The debate over car size is still not over. The manufacturers offer different size cars, dictated somewhat by fuel costs. If you were all betting - and we do bet every day - would you lease a full-size Parisienne or a new downsized Delta Brougham or Buick LeSabre? Would you suggest that your customers lease RWD full-size vs. FWD downsized? Personally, I think the mechanical problems of the FWD cars are behind us and that the manufacturers have done a magnificent job to put them behind us.  I would pick "What's new is for you," meaning FWD downsized.

But that doesn't solve the high-mileage used-car marketing problem. We have about 723 cars on the ground now, parked in four storage lots, waiting for the Messiah to come and show us, in good faith, how to sell them at a profit. The question is a real one. Some of us here feel we can sell them at retail with an extended warranty. Some of us feel that cash today is better than cash tomorrow or next week or next month; sell them, take your lumps, and try to be smarter with the leases you put out today than what you put out yesterday. Some of our auction people are talking about reconditioning. Some talk about making sure that you have the "right" car selected in the beginning in terms of color and equipment. But we all have to realize and admit one important factor: the 70,000-plus cars are going to take work.

When we go back home to our offices, we're going to find people still offering extremely competitive rates on extremely high-mileage cars with some extremely low increases. To my thinking, we're going to have to be big boys and walk away from those deals.