A 22% increase in the intermediate fleet car population and an 8% increase in the compact fleet car population highlight Automotive Fleet's seventh two-year survey of the leasing rental industry.

Representing industry trends and changes since the last survey in 1972, the 1974 poll also revealed there was a slight decrease (4%) in the number of finance or management leases issued. Both fixed (net) leases and full service (maintenance) leases gained slightly. Based on 425 responses, the survey further reports that 72% of all leases issued in 1974 were finance leases and that 13.5% were full service leases. In 1972, finance leasing made up 76% of the market; fixed leases made up 13%, and full service leasing represented 11%.

The survey's 425 usable responses represented a 12.8% return on 3,325 questionnaires sent to leasing - rental companies on Automotive Fleet's mailing list, which is verified by Business Publications Audit and represents all sizes of known leasing and rental companies in all 50 states and Canada. The questionnaires were mailed by Publisher's Reserve, Inc., a marketing research firm. Similar surveys have been conducted by Automotive Fleet since 1962. Researchers consider a 10% survey return suffi­cient for an accurate market analysis of industry trends.

In its effort to detail significant industry trends, the survey probed the following areas with its questions:

• Company age

• Whether company is a new car dealer affiliate

• Average age in months of vehicles at replacement

• Average yearly mileage operated per vehicle

• Preferred type and size of car and truck (compacts, intermediates, GVW and trucks under or over 19,500 low priced, middle priced, high priced)

• Percentages of cars and trucks leased or rented

• Number of cars leased to fleets or individuals

• Average dollar value per car or truck

• Average monthly revenue per fleet car

The survey concluded by asking for an informal, anony­mous reply to the question "What is the major problem confronting the leasing and rental industry today?" So per­tinent and diverse were the replies to this question that they are detailed in a separate article following this survey wrap-up.

Finance, Fixed or Maintenance

The 1974 Lease Type Preference question showed that there was a slight drop in finance leasing over the 1972 figure of 76%. Finance leasing is also referred to as open-end leasing because of leasing company and lessee commitment to make up higher or lower prices than those anticipated for the used vehicle when it "comes off" of a lease.

In 1962, the first AF Lease/Rental Survey revealed that 42% of leased vehicles were on finance leases: 33% were on fixed or net leases with their pre-set cost figures; and 25% were on full service or maintenance leases. So finance leasing still enjoys an overwhelming popu­larity with the lease/rental industry, with fixed and full service leasing leveling off for the last two years.

Fleet Composition By Model Used

Other significant industry trends were indicated in the type of car preference section of the biennial questionnaire. From 1972 to 1974, intermediates posted a 22% in­ crease, thanks to the energy crisis. There was also an in­ crease in the number of compacts in the lease/rental indus­try - up 8%.

It should be noted that intermediates and compacts now represent over half (54%) of the car population in the lease/rental market. Middle-priced, standard-size cars show­ed a slight drop in the last two years, falling from 39% to 33%. The lower-priced standards showed a tremendous drop from 28% to 14% of the market. These will always be remembered as the cars people used to drive, although many car experts say they will make a comeback in the very near future. Despite the fact that these low-priced standards have dropped off 14%, they still have the highest 12-year average (37%) that any other type of car in the lease/rental market.

Company Age

Replies to the question "What year did your company start in the leasing or rental business?" help reinforce the belief that automotive leasing is a contemporary business geared to modern service needs.

A total of 37 responses (out of the 425 responses re­ceived) indicated that they had been in business in 1949 or earlier. The years from 1950 to 1959 were represented with 119 responses. Between 1960 and 1964, there were 78 re­sponses. Between 1965 and 1969, there were 105 re­sponses, and 57 companies starting lease/rental operations between the years 1970 to 1974.

It was estimated that 87% (369) were in business prior to 1970; 62% before 1965, and 16% have been in business for 25 years or more.

Car Dealer Affiliation

Asked whether their leasing firms were new car dealer affiliates, 152 said "yes" and 251 said "no." This year there was only a slight decrease in the negative replies. The per­centage went from 61% in 1972 to about 58% in 1974. Also in 1972, 39% of the respondents said they were dealer affiliates. This year, only 36% said they were.

Vehicle Age

Average age of vehicles at replacement figures, calculated in months, revealed a slight decrease compared to 1972 figures (from 25.2 months to 24.3 months) in leased cars. In the area of rental cars, there was a slight increase (from 11.5 months to 12.6 months). Leased trucks were turned in at 38.2 months in 1974, compared to 41.5 in the last survey. Rental trucks were turned in at 31.4 in 1974, com­ pared to 35.1 in 1972.

Yearly Mileage

Yearly mileage figures for 1974 averaged 20,904 for leased cars; 14,361 for rental cars; 30,484 for leased trucks, and 21,421 for rental trucks, all of which were slight de­ creases in 1972 figures. In 1972, leased car yearly mileage averaged 22,244, and in 1964 it was 19,656. Rental car yearly mileage in 1972 was 14,424, but in 1966, the mile­ age was 15,924. Leased trucks in 1972 were run for 37,159, and rental trucks were run for 28,148.

Average Dollar Value

Average lease-rental car dollar value soared from $3,987 to $5,203 since 1972. In 1962 the average value of a lease- rental car was $2,790. Average monthly revenue for leased and rented cars went up from $268 in 1972 to $357 in 1974, up $89. Between 1970 and 1972, the jump was only $27. In 1966, the average monthly revenue was $190.

Trucks

The 1974 AF survey shows a slight increase in the total number of trucks leased, from 85% to 88%. Under 10,000 G.V.W., it was 48%, from 10,000 to 19,500 G.V.W., 22%, and over 19,500 G.V.W., the figure was 30%. Total trucks rented was listed at 12%; under 10,000 G.V.W. went from 15% in 1972 to 23% in 1974; between 10,000 and 19,500 G.V.W,, the figure was 29%, and over 19,500 G.V.W., it was 48%.

What Is the Major Problem Confronting the Leasing-Rental Industry Today?

Increasing operational costs, anticipating marketing con­ditions, and general INFLATION were listed as just some of the problems facing the leasing-rental industry today. So say the respondents to AF's 1974 Biennial Survey. Forecasting residuals, disposing of high mileage cars, slow delivery by manufacturers, are also listed as major head­ aches for lease/rental executives.

[PAGEBREAK]"High interest rates, lack of cooperation by fleet admin­istrators. Also by those bribed by competition, lured by free cars, etc. In other words, payoffs to fleet administra­tors which prevent an honest, legitimate leasing company to compete honestly and without recourse. There is a certain amount of aloofness amongst fleet administrators that be­ cause of their 'power' they can be swayed and romanced by companies who offer nothing except favors and premiums to those individuals. It is a shame to admit that this goes on but everyone knows it does. It almost discourages the honest leasing company, but perhaps they did not desire an association with those type of individuals in the first place. There is no room in the leasing industry today for those characters. They will soon all filter out, we all hope."

Another lessor complains that his biggest problem is the government and that money cost, lack of confidence in the economy and the oil problems are making it difficult to survive.

More than anything else, cost and inflation were the largest headaches for the lessors. Cost of money, cost of cars, cost of borrowing, cost of new equipment, cost of interest, cost of costs, cost of merchandise. Some lessors blame the news media, others blame the government. No stabilization of prices or rates.

Some lessors blame the other lessors: "too many com­panies in business that should not be in the business."

One lessor stated that his biggest problem is competing against people who are going broke and don't know it. Maybe this problem of expansion deserves more than just a nod. Maybe there's not enough quality people around any­ more; or there are quality people around but they're smoth­ered by the volume of competition.

Regardless of the complaint, 99% of the replies have some direct or indirect tie-in with the shaky economy. Unclear and deceptive lease practices and excessive cancella­tion penalties, was a complaint of one lessor. Anyway you look at it, the troubled economy manages to edge its way into every lease executive's headache.

One "different" problem was presented in the following way: "Unstable economy, although it presently is helping leasing to get a much larger share of units on the road."

This reply is interesting because you might think that with the high cost of everything, especially cars, people might want to lease cars instead of just buying them. How much of a problem is the economy?

Some lessors put the blame on the customer: "Misrepre­sentation, insurance, willingness of the customer to over extend himself."

Here is a further sampling of some of the problems being experienced by lessors:

• "Banks in leasing - lack of adequate knowledge of costs and expenses of new people in leasing.

• "Keeping up with inflation."

• "Competitors not knowing their costs."

• "Getting small businesses to understand the advantages of leasing and the bookkeeping procedures."

• "Reliability of accessories A/C breakdowns, etc. High interest costs, slow payment by customers, continued in­ crease in the cost of cars."

• "Bad advertising practices - particularly by dealer affiliated companies."

• "Entry by banks, wanting only to get a slightly higher return on their money than they can obtain by convention­al financing."

• "High cost of money and negative reaction by the news media is the major problem confronting the lease/rental industry."

• "Too many to list here."

• "Quite sizable jump in the lease rates compared to two or three years ago. The renewal rate is difficult to main­tain."

• "The cost of vehicles has increased so dramatically and operational costs have driven the 'break-even' point so high that companies may be better off paying mileage."

• "Establishing practical residual values on medium and high-priced units in view of further gas shortages."

• "Failure on the lessee's part to contribute his responsi­bility toward lessor's investment. Also poor management on lessee's part to instruct driver personnel properly. Very poorly engineered equipment purchased from manufac­turers."