Should (Can) You Lease?

Posted on November 1, 2008 by - Also by this author

As this issue heads to press, the Dow has crashed through 10,000, the Bush bailout looks more like a Band-Aid, and consumer confidence has collapsed. Businesses yearn for a “global credit warming” that could yield greener financial futures.


NO. 1. Brenner Financial Inc. of Harrisburg, Penn.: Dan Dyson, leasing manager. Three-fourths of Brenner’s leasing portfolio comes from chauffeured transportation.


LCT: What is the overall state of the vehicle leasing market for chauffeured transportation operators?

DD: Our market hasn’t changed all that much. We still have money to lend. We’re still looking at acquiring new business for customers. Where they may have issues is not so much with leasing companies as with banks. Livery customers who do business with banks will see it become more difficult. Newer customers will have more trouble. We advise customers that banks tend to give the best rates, and leasing companies fall in behind that. Most leasing companies borrow from banks, so some leasing companies may have trouble getting funds to loan out. We are not in that position. We have good liquidity. We think customers will need to do what they’ve always done: Be careful of spending and your debt load; keep credit as clean as possible. Because short-term lending is very difficult, banks are not willing to lend to each other. That will tighten the market. This is going to get worse before it gets better.


LCT: What extra qualifications are needed for a lease?

DD: We haven’t changed our underwriting policies. We have always compared (favorably) to a lot of the other leasing companies. Ours has always been a bit stricter than other companies. Some companies will loan or lease with an application, but we require the last two years of federal tax statements, the last three months business bank statements, fleet lists, etc. We’re not facing a situation where we have to tighten standards. Our practices won’t change significantly. 


LCT: How will the leasing environment look going into 2009?

DD: I’m not an expert in banking business, but it looks to me like it will take some time for people and banks to have confidence again, and for lending to become more available. For anyone who’s been in the business and has a good business, they will be able to continue to acquire vehicles and get funding. 



NO. 2. Advantage Funding of Lake Success, N.Y.: Don Coolbaugh, vice president of sales. 


LCT: What is the overall state of the vehicle leasing market for chauffeured transportation operators?

DC: It’s really the same, if you take a micro view. The macro view is the big problem. Many of these (mortgage) deals were made with people who shouldn’t have been funded, and it systematically affects everything. The credit markets have seized up. They are not lending. Banks are not lending to each other. The money flow has stopped or slowed down dramatically. A conservative posture has been taken by most banking institutions. They will do it for solid credit only, and a less aggressive structure. You will need 10% to 15% down and shorter terms. On loans, the credit box is thinning. A narrower mix of transactions is getting through. Leasing and financing companies may get shut off to new funds and current funds.


LCT: What extra qualifications, requirements, and/or costs are needed for an operator to lease vehicles?

DC: The requirements and standards for most leasing will get more stringent. Credit will be tighter, and we will want to see a more established credit history. The rates are stymied for inter-bank lending. If this continues, rates may seem to progress higher only because of less money in the marketplace.


LCT: How will the leasing environment look going into 2009?

DC: Many of the corporate ways of doing leasing through GMAC and Ford and traditional dealerships will go away. Leasing packages have been pulled out of dealerships as we speak. Leasing vehicles will get harder. Many things will be indicative of what happens over the next few weeks (October), and the money system at large. We’ll have to see how easy it’s going to be to acquire funds in the marketplace for companies doing business. That affects all of us. Our parent company is a conglomerate — a diverse, Japanese trading house (Marubeni) that is well established. We stand on solid foundations. From that standpoint, we’ll be around. We have an easier credit box, and our source of funds is still there. We’re not going into the open commercial market for them.


LCT: What is your advice to operators who need to lease vehicles in coming months?

DC: Find banking/leasing/financial institutions with strong backing and stability to make sure they will be around to service loans. Prepare a document package properly, with all the background information done, bank statements, etc. Show the strength of the company up front in a submission package. Show previous good payment history. Your past is a good indicator.



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