A war in which one side has The Bomb ... and the other has a couple of slingshots. That's how some industry members view bank entry into the vehicle leasing market, where an ample source of funds can mean low rates. Lessors are concerned. At last spring's American Automotive Leasing Association convention in Miami retiring Stan Chason pinpointed their apprehension: While stabilized interest rates have served to compress the banks' point advantage, Chason said, "That doesn't mean the banks have pulled in their horns." 

"They are still very active in some markets, and are still undercutting our prices," the executive pointed out. "But the smaller spreads between our costs and their bids at least give us a better chance to offset the differences by the service level we can provide to the lessee. You will still continue to lose the client whose only interest is cost.

But that type of client will forever shift his business to whoever is cheapest at any given time."

As Chason's listeners knew, bank involvement in car and truck leasing is not a new development. Since entering the field in '65, these institutions have leased at least 2,500,000 vehicles - most all of them indirectly, with substantial emphasis in the consumer area. According to figures from the American Banking Association, 41 percent of mid-size banks ($100-500 million assets) and 68 percent of large banks ($500 million and up) engaged in leasing as long ago as 1981.

But today, some banks are entertaining the direct leasing market. Comprehensive, "turn-key" lease management systems are being developed to assist in the trend. And spurred by predictions that leasing is expected to more than triple by the end of the decade, banks are said to be eying the potential in small regional business fleets.

"There are approximately 15,000 banks in the U.S. now," says James Conner, president of a Pennsylvania-based lease management company for banks called the LeMans Group. "Given the merger and acquisition process, we project that by 1990 the number will be down to some 9,000. Of that total, we project about 10 percent, or 1,000, will be involved in vehicle leasing.

"And we feel that banks will be very successful in leasing." Conner continues. "Because they are unable to provide the sort of services that a Gelco can offer, I'm not sure they will have much penetration among the big national fleets. But when it comes to fleets for smaller, regional companies, I think banks are going to compete aggressively - and do very well."

Owned by three financing concerns, Conner's LeMans Group publishes an advisory quarterly called LeaseManagementReview and provides banks with software designed to help administer the leasing portfolio. Most notable is LeaseMASTER II, a sophisticated, comprehensive system which runs on the IBM computer, allowing financial institutions to access leasing information in "real time." After selling the first LeaseMASTER II to First Pennsylvania Bank of Philadelphia last October, LeMans has rung up an additional 11 sales.

According to First Pennsylvania vice president Joe Corvaia, leasing in general has proven "very attractive." Since entering the lease field in 1974, Corvaia's bank has enrolled some 16,000 vehicles in its program; about 30 percent are consumer leases, with the remaining 70 percent related to business. While fewer than half of those include fleets of more than six vehicles, the largest consists of 20 to 25 cars.

"Because of the nature of our relationship with our customers, we're not really 'into fleets' per se," Corvaia says. "We do very little direct leasing, working instead through a dealer network which includes franchise car dealers and independent leasing companies. The smallest fleets are very attractive to us, though. Within the last year, we've developed some very good small-fleet contacts through our dealer network. And they've proven very profitable ..."

The consumer-commercial percentages are much the same at New York's Manufacturers Hanover bank, where, since 1980, some 12,000 vehicles have been enrolled under the auspices of a program called Wheelease. Three-quarters of those vehicles are business-related, most in packages of one to five units.

"We don't do any direct leasing, and we're not going after any large fleet business at all," asserts Wheelease's Anthony Langan. "All our leasing is done through a network of 360 dealers and independent leasing companies." With an aggressive plan now extending to 18 states, Wheelease provides clients with a wide range of leasing services - including computer and bill-collecting programs, training manuals, and "point of sale" materials such as signs and brochures.

If California is a harbinger of national trends, the industry should take a close look at Security Pacific Credit Corp. in Westlake Village, CA, a subsidiary of Security Pacific National Bank. Security Pacific entered the vehicle leasing market in the early seventies, primarily to meet consumer needs. The firm now has some 35,000 units on lease, more than 30 percent of them commercial, including fleets.

"Acting as we do as a third-party lessor, our credit people will work with a fleet manager to see what he wants to accomplish in terms of financing," says Spence Fullerton of Security Pacific's Strategic Services Administration. "We don't have any canned, 'great fleet-leasing program.' We prefer to work on an individual basis, offering customized alternatives in conjunction with the normal leasing benefits ..."

"After years of doing business in California, we became aware of the fact that not all areas of the country know about leasing advantages," Fullerton explains. "Therefore, a considerable portion of our business has begun to be generated outside California, in areas such as Seattle, Atlanta, Baltimore and Minneapolis. That's a significant trend ...

"I'd be remiss if I didn't say that capital tax investments remain an important part of our offering," Fullerton goes on. "In my view, leasing by banks will continue strong, with a substantial number of benefits ... both in the short-and mid-term."

In an informal survey, half-a-dozen independent, regional lessors showed some concern about bank penetration in the small-fleet area - but not a lot. "Banks are in vehicle leasing for only one reason: to buy up tax benefits," contends John Harris, vice president of the 500-car Americar Leasing System of Alexandria, VA. "If ITC is done away with or depreciation rules are tightened up, you'll see banks get out of the leasing business like crazy.

"While banks are tearing people up right now in consumer leasing, I don't look for any increase in their share of the commercial fleet market," Harris says. "Your good commercial customer with a medium-size local fleet - say, 50 cars - wants a direct relationship with a leasing company that can provide reliable physical services. And banks, of course, can't touch us there."

Harris' comments were echoed by AALA Director Sam Goldman, whose Executive Car Leasing Co. in Los Angeles has some 10,000 units on lease - 80 percent of them in commercial accounts, many of those in fleets of 30 to 40 cars. "Business is about the same as last year, in part because of trouble getting cars from the manufacturers," says Goldman. "But we're not noticing banks getting into commercial fleets. Once you have equal interest rates," benefits are equalized, Goldman says, and then "you find that banks simply can't provide the services to the customer that we can."

At B&M Equipment in Atlanta - a division of Beaudry Ford - sales personnel report little activity by banks in commercial leasing and "good business" with some 7,000 vehicles on lease. In Chicago, Barry Lipin's main problem at his 1,000-vehicle U.S. Auto Leasing Co. is the competition's insistence on residual values that are unrealistically inflated. Even so, "I think my business is going to be better than ever," Lipin says. "We give people their money's worth, and you can't ever get hurt doing that."

If bank penetration of the small fleet market has been minimal so far, at least two regional lease companies report developments with important implications for the bank-retail scene.

One of them, 400-vehicle Fox Leasing of Newport Beach, CA, has opened a special leasing company for small banks and savings and loans called Nationwide Lease Line. With 50 participating branches, Nationwide serves as a "turnkey operation," acting as the banks' offsite leasing office by overseeing vehicle accounting, insurance, delivery, and disposal. "We figured if banks were getting into the business, we didn't want to fight them," says owner Warren Fox. "Instead we said, 'Okay, we'll be your leasing department."

The second development involves the Colonial Car Lease Co., Inc., of Plymouth, MA, whose president is AALA director James Golden. After 30 years as an independent company, 3,000-vehicle Colonial saw its status change to "wholly-owned subsidiary" last October. The firm's new parent? Union Warren Savings Bank of Boston.

This much, then, is clear: There are some new combatants in the vehicle leasing industry. There's a retrenching underway - and some developments in the nature of the warfare. As to who will come out victorious, the smoke's still too thick to say.