NVLA LeaseWire
07/05/2020 | Issue 15

President's Message
Attempting to process all of the information that has been hurled my way over the past few weeks has been like trying to drink from a fire hose.

There have been comparisons that what we are going through economically bears resemblance to the Great Depression, the 2008 – 2009 credit crisis, and even 9/11. However, it is not like any of these.

One reason is that the speed of information today eclipses the orderly flow of facts that took place during all of those previous trials. In 2008 - 2009, as we navigated through the credit crunch, part of our daily routine was to wait for the news in the morning papers, which we perused only after we had the first savored sips of our percolated coffee. We had confidence that the writers who penned the articles prided themselves in not letting their biases interfere with their duty to report the facts. There was a cadence in relaying information and an equally evident rhythm in the absorption of the message.

Now we have news being flung at us during every one of the 86,400 seconds in each day, at such velocity that it is impossible to responsibly digest and discern how well researched or partisan it may be. When this is combined with having to battle the blazing fires around us, it can be, and for many is, overwhelming. We need to be able to cut through the fog (yes, my reference to "fog" being similar to "the cloud" is intentional) and we must each take the necessary time to digest what is vital to where we are right now, and vital to where we need to go.

To quote Matt Daus, who in September 2001 was commissioner and chairman of the New York City Taxi and Limousine Commission and is a frequent keynote speaker at our NVLA conferences, "[COVID-19] dwarfs 9/11 in loss of life and economic impact, and we are in for a heck of a ride."

Elizabeth Gilbert, best known for her memoir Eat, Pray, Love, talks on Insight Timer about COVID-19 when she says, "It's like the rug being pulled from under us, then the floor from under the rug, and then the ground from under the floor. "

She speaks like she runs a leasing company!

With great wisdom, Gilbert then adds, "But they can't take the 'inside ground' away from us – at least not forever."
If you have ever taken a good look at a tree stump you know that it exposes a treasure of biographical information. By counting the rings, you can determine how old the tree was when it was cut down. The broader rings tell us which were the good years with plenty of sunshine, rain, and nutrition. Extremely narrow rings are from a time of drought and distress. Scarring in the rings can be from a forest fire. Even a past insect infestation can be revealed. Each ring, whatever its width and composition, contributed to the strength and stature of the tree. Looking at the tree before it was felled does not give away much of its life story that was hidden beneath the outer bark.

It is difficult to realize now, while we are in the middle of the storm, that today is but a moment in time--a thin ring in our life story that will ultimately be encompassed by thicker rings.

While we don't control the outcome, we can certainly control our actions. Post-COVID-19 (and I am confident that the day will come that we can say that we are in "post-COVID-19") we will need to run on every cylinder using all of our combined grit and knowledge to not only get our own business back on track but to also actively support our cohorts. Together, we will get through this and come out stronger and even more resilient to stand tall again with strength, purpose, and pride in our industry's accomplishments.

NVLA Conference Rescheduled - October 2020
Due to the COVID-19 pandemic, the National Vehicle Leasing Association has rescheduled its 2020 Annual Conference for October 14-16 at the Sheraton Austin Hotel at the Capitol in Austin, TX.

We are looking forward to bringing the NVLA community together this fall after facing pandemic-related disruptions to both our personal and professional lives!

Boost Your Visibility With an NVLA Sponsorship

The NVLA Conference is an outstanding opportunity for vehicle industry partners and related organizations to make and solidify relationships with independent vehicle lessors through in-person communications and marketing.

NVLA is pleased to offer a variety of sponsorship opportunities designed to extend their value year-round.

For a full listing of annual sponsorship benefits, please review our sponsorship prospectus here.

If you have any questions or are interested in becoming a sponsor, please contact NVLA Executive Director Mike Mathy.

Exhibit at NVLA 2020

The NVLA’s goal is to connect members and vendors and facilitate valuable business connections. The welcome reception, breaks, and meals will be held in the exhibit hall to generate traffic at exhibit tables.

There are still openings to exhibit at NVLA 2020!

Kontos Kommentary: COVID-19 Special Edition
Tom Kontos, KAR Global Chief Economist
Although the COVID-19 pandemic is unprecedented, insights can be drawn from past remarketing industry experience and thereby using history as a guide in these uncertain times. Because the last ten years have represented the longest expansion on record, one must go back to the Great Recession of 2008-09 and the 9/11 timeframe to find downturns and shocks to the economy that negatively affected wholesale values for a sustained period of time. The chart below depicts trends in wholesale prices during the first decade of the new millennium.
The recession of 2001, which lasted from March through November of that year and encompassed the tragic events of 9/11, had a significant but short-lived effect on wholesale values. The continuation and acceleration of year-over-year price declines beyond the roughly 5% year-overyear drop in October 2001 following 9/11 was due primarily to an influx of off-lease volume and high new vehicle incentives even as the economy rebounded. The downturn in average prices after 9/11 continued for 20 months until May of 2003, which I described as an “inflection point” in the wholesale market at the time.

In the Great Recession of December 2007 to June 2009, wholesale used vehicle prices fell even more dramatically than post-9/11 but recovered more quickly. The absolute bottom was reached in October of 2008, which I then described as “Red October” as wholesale values fell by more than 15% year-over-year — a record that still stands (although possibly not for long). Thus, that “inflection point” was achieved in roughly ten months versus the 20 months post 9/11.

Fast-forwarding to the current situation, we can broadly apply these past patterns as we think about the severity and duration of wholesale price declines in response to the virtual cessation of economic activity in a high percentage of the U.S. market. The recession that this has induced will likely follow a pattern that mirrors the “curve” of the pandemic often talked about by Dr. Fauci in his press briefings. Just as the pandemic pattern is likely to worsen before it gets better (though as a nation we are trying to “flatten the curve”), used vehicle values (when auctions resume some semblance of pre-March level of sales and conversion rates) are likely to fall by the sorts of double digit year-on-year levels we saw both post-9/11 and during the Great Recession.

So, the duration of the decline will likely correspond to the length of the current recession, which again depends on the timing of resumption of social and economic interaction as the pandemic is contained.

And, it’s best to expect that upticks in used vehicle values are several months down the road, though strong demand for used vehicles in tough times, supportive government fiscal and monetary policies, and low oil prices should help limit the damage.

Source: Analysis is based on over 7 million annual sales transactions from over 250 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. KAR Global Analytical Services segregates these transactions to study trends by vehicle model class, sale type, model year, etc.

Disclaimer: The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, its management or its subsidiaries; and their accuracy is not warranted.

Forward-Looking Statements: The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts (including, but not limited to, expectations, estimates, assumptions and projections regarding the industry and business) may be forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “promises”, “likely to” and similar expressions identify forward-looking statements. Forwardlooking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those uncertainties regarding the impact of COVID-19 on our business and the economy generally, and those matters disclosed in the company’s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.

NVLA Hosts the First Webinar in its COVID-19 Series
On April 22, the NVLA hosted its first pandemic-related webinar for more than 70 registrants. “Deferring Customer Payments – a Practical Approach” was an excellent presentation, even though the Q & A period was cut short due to a technical glitch. Panelists Adam Berger of Doering Fleet Management, Garrett Kautz of 1st Source, and Nick Markosian of Markosian Auto, all provided their respective insights from their unique points of view within the leasing industry about dealing with this urgent and critical challenge.

NVLA President Doug Moore moderated the event and said, “We wanted to focus on what our members should be doing next, and what better way to do this than hear from three lessors who are in the know and on the front lines? They delivered with several practical ideas, and I have received nothing but good comments about the content and speakers."

Information about the NVLA’s next webinar will be available soon!

Facing Your Customers' Financial Difficulty in Unprecedented Times
Bill Elizondo, COO of AFS Dealers and BHPH industry veteran
Today, about 1 in every 6 Americans is unemployed. So, look at the house to your left and right. Out of those families, at least one adult (maybe the only one working) is unemployed.

The COVID-19 pandemic has no boundaries and has started to affect the white collar jobs: sales associates, legal assistants, programmers, medical assistants who perform non-essential medical procedures, and professional business services. If white collar employees have not taken a pay cut to continue working, they are probably filing for unemployment for the first time in their lives. Most individuals are now faced with questions about how to handle expenses they never thought they would have to worry about. With US consumers already holding a record level of debt, it is vital that we build rapport with our customers.

Right now, the most important action we can take is to make our customers feel valued and comfortable in their decision to continue to do business with us.

Most of us have received emails from companies that outlined specific guidelines, cleanliness standards, and the process that would be followed if they would continue to stay in business. Those declarations made you feel like they would take the precautions necessary to ensure your safety and the safety of their employees.

If you have not already, you must reach out to your customers in that same way.

Next, build rapport with your customers and assure them that you are there to help them through this unprecedented time. In doing so, you increase customers' trust and confidence in not only your willingness to help them get past these difficult times, but also in your knowledge of how to help them.

Research information about businesses and programs that will assist your customers during this pandemic. We have the world at our fingertips; use it to help your customers to effectively increase your business's worth.

  • Banking, finance, utility, phone, Internet, and mortgage companies are offering breaks on payments during this time.

  • Numerous companies are offering products and food that might lessen the burden for the customer who has not yet started to receive unemployment.

  • Volunteer services are available to support families. Research to see what is available locally.

Communicating with your customers today will help you lessen their concerns while also helping you survive as a business owner. Do not assume that your customers will research these options themselves. This is a difficult time, and some will just freeze in fear.

  • Make a list of specific companies and programs  and hand customers a copy or send out via email.

  • Make your list of resources as relevant as possible by taking the time to understand your customers' expenses. Learning about their expenses will also help you more efficiently collect and sell.

As of the time of writing this article, most people who filed for unemployment over two weeks ago are starting to get checks. The stimulus checks have started to hit bank accounts and some of the nation is looking to start back to business on May 1.

So, what if your customer does not qualify for unemployment or will not get a stimulus check? What are you prepared to do? This is a decision maker’s call and one that you can handle case by case. Things to consider:

  • Payment record

  • Job history: Is the customer looking for another job? Has the customer been employed steadily in the past?

  • What else has the customer indicated that he or she is doing to bring income?

Lastly, consider having compassion for your customers. This is not just one or two people who have been affected by this pandemic; it is our entire world.

In my opinion, we are better together.

National Vehicle Leasing Association
N83 W13410 Leon Road
Menomonee Falls, Wisconsin 53051
United States | 414-533-3300


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