With the dawn of the new year, questions of financing for fleet replace­ment or expansion are much on the minds of the nation's fleet adminis­trators. Charles McCrary, manager of the Sales Finance Department of Chevrolet Motor Division, routinely spends much of his time providing answers to questions of fleet finance. Automotive Fleet recently gathered a number of questions from fleet ad­ministrators and presented those que­ries to McCrary in the following interview.

AF: With a new Administration as­suming control in Washington, what do you see in the area of government controls as they apply to fleet opera­tions?

McCrary: "We feel the advent of more and more governmental regulations will have a peripheral effect of making satisfactory credit arrangements more and more difficult for many fleets to obtain. Areas of governmental regula­tion which seem imminent are used vehicle warranty and disposition prac­tices. Serious proposals have been made at various governmental levels to require licensing of fleet operators who dispose of used vehicles as retail dealers."

AF: Can you identify any particu­lar pressure group that seems to be lobbying for expanded government control of fleet affairs?

McCrary: "Consumerists are pushing for strong used vehicle warranty pro­grams. Mechanics' licensing require­ments are being promoted in some areas. As such governmental require­ments become more common, evalua­tion of credit requirements by lending agencies will be importantly influenc­ed by the borrower's ability to demonstrate satisfactory compliance with such regulatory requirements."

AF: Can the country's recent histo­ry serve as an indicator to the future of fleet financing?

McCrary: "A factor which will affect extension of fleet financing in the fu­ture is the experience encountered by many lending sources in 1974 and 1975. The recession and business fatal­ities encountered in these two years were far worse than at any time since before World War II. Many of the man­agement personnel of these lending sources had never in their entire busi­ness lives experienced the difficulties they then encountered. As a conse­quence, lending policies have been tightened and a much closer scrutiny will be given to future fleet financing requests."

AF: What are some of the specific details of this closer scrutiny that you foresee?

McCrary: "Increased insurance costs will cause lending sources to pay closer attention to a prospective borrower's loss experience as another factor to be considered when evaluating requests for financing. Some lending sources will be taking a much closer look at all phases of a prospective borrower's op­eration and will not confine their inquiries only to financial matters and balance sheet information. Their inves­tigations will include the character, ex­perience and capacity of management personnel, their operational procedures and their used car disposal practices, to name just a few items of interest to lenders."

AF: What steps will fleet borrowers have to take to justify their loan re­quests?

McCrary: "Many lenders' experiences of the past two or three years have taught them a lesson that they must be more familiar with the total operation of their fleet accounts rather than relying wholly on after-the-fact financial reporting. Many fleet accounts are go­ing to be required to provide more comprehensive and in-depth informa­tion regarding their operational philo­sophies and plans as a prelude to consideration of their financing requests."

AF: In which direction do you see in­terest rates going?

McCrary: "We believe the increasing activity of the economy will eventual­ly result in higher interest rates. As loan demands from various businesses increase, the result will inevitably be increases in the interest rate. While we will not hazard a guess as to the exact figure, we would not be surprised to see the prime rate go well above eight percent in 1977."

AF: What trends do you see now that will indicate economic conditions in two or three years when today's new fleet cars are due to be replaced?

McCrary: "The foregoing comments may seem to be somewhat on the neg­ative side. However, this was in no way our intention. Actually, we feel very optimistic about fleet prospects for the next several years. True, we feel fleet management is necessarily to have to live with higher interest rates, higher insurance costs, more government regulations and more sophistication in the credit-granting process. But, at the same lime, we feel strongly these same pres­sures will result in an expanded fleet market and expanded opportunities for those fleet managers who learn to cope with increases in costs, more governmental regulations and more restrictive credit. Also, we believe more operators of car and truck fleets will look to lessors for fleet management services."

AF: Will the economic factors you foresee have an impact on fleet leas­ing as an alternative to ownership?

McCrary: "The increased cost of automobile ownership will result in many individuals relying to a larger ex­tent on leasing for basic transportation and to rental for occasional business and personal use. Those rental and leasing fleets who are most successful accepting and living with these changing conditions will be generous­ly rewarded by substantially increased business and profits."