NVLA LeaseWire
09/26/2020 | Issue 18

President's Message
There Is a Great Task Before Us

We lease assets to our customers who, in turn, utilize those assets to assist them in creating revenue. We are partners to many industries that we have no expertise in, like medicine, filmmaking, transportation, import and export, manufacturing, landscaping, and pest control, to name but a very few.

Three such examples that I have been involved in come to mind: working with an up and coming television producer who, twenty-five years later, was awarded the 2018 Academy Award for best picture; leasing a sports car to a recent college graduate (only after his grandmother signed a PG!) who had no job, but he had a dream to start a craft brewing company that has become one of the largest independent beer companies in the country; and lastly, opening an account to lease vans to an electrical supply company that had one location, and today has over 60 branches in Canada with 300 offices throughout 30 U.S. states.

It wasn’t our expertise behind a camera, or tasting hops, or assembling light fixtures that helped these customers achieve success. It was our team’s skill as a lessor that put together a fleet plan for a weekly television series, structured a lease on a Datsun 280Z, and helped develop an efficient product delivery program for a company growing at lightning speed.

NVLA members have thousands of similar stories, many of which are much better than these, where they have played a key role in the success of entrepreneurs and the growth of the North American economy. So many business owners can trace their success back to a time when, early on, a lessor had enough faith in them and their company to fund vehicles or equipment that became the underpinning of a thriving business.

Christina Romer is an economist who was appointed chair of President Obama’s Council of Economic Advisers and co-authored the administration's plan for recovery from the 2008 recession. She was chosen for the assignment because of her extensive studies on the Great Depression of the 1930s. I heard Romer recently say that COVID “may cause a permanent change in how we live and how we do things. We have to shut down some industries, and there may be some industries that will grow up.”

I was on a call a few days ago with about fifteen thought leaders in the daily car and truck rental industry. I was amazed to hear their consensus that they are looking to the leasing industry as a vital supplier as they are forced to restructure their business model.

There is a great task before us and an even greater purpose. As we continue to partner with established and new industries, we have an undeniable opportunity to be key players in the upcoming economic recovery. Lessors fuel entrepreneurial dreams. And we will continue to do this one lease at a time.

The State of the Asset Finance Industry Throughout North America

Thank you to all of our members who took the time to complete our survey regarding the state of your businesses' receivables and collections! We have combined the responses from our members with responses from those of our Canadian counterparts in the Canadian Finance and Leasing Association (CFLA). Our goal in collecting this information is to be able to provide you with an overview of the financial landscape of the leasing industry during the COVID-19 pandemic.

Even amidst economic turmoil and record unemployment, we are pleased to share that our independent leasing companies seem to be choosing their customers wisely and pivoting the focus toward collections, while catering to the needs of their customers. Below is a breakdown of the results from our roughly 60 respondents from throughout North America.

The vast majority of NVLA members reported receiving deferral requests from less than 10 percent of their portfolio. Whereas 22 percent said that they received deferral requests from up to 20 percent of their portfolio. Moreover, 81 percent of NVLA respondents reported that they granted deferrals to less than 25 percent of their portfolio, with a majority of the deferrals granted not having been utilized by their customers.

About 30 percent of Canadian respondents reported receiving deferral requests from less than 10 percent of their portfolio, with 28 percent reporting deferral requests from nearly 30 percent of their portfolio. The majority of businesses has granted deferrals to less than 25 percent of their respective portfolios.
A majority of NVLA members responded that they have not incurred any NSF transactions to date, with 35 percent stating they had incurred NSF transactions for one to five percent of their total portfolio. About half of the respondents reported that between one and five percent of their accounts were more than 30 days delinquent.

The majority of CFLA respondents reported incurring NSF transactions for about five percent of their portfolios, with about five percent more than thirty days delinquent.

Cash Flow
Great news, here. Ninety-five percent of NVLA members and 85 percent of CFLA members who responded said that there is no limit to their ability to survive under their current deferral and operating conditions.

Lay offs
Amidst record unemployment rates, a vast majority of respondents in both countries reported that they have not had to lay off any employees, while 20 percent of NVLA participants said that they have laid off up to 20 percent of their staff.

New Originations
Compared to May of last year, 35 percent of NVLA respondents said that they have roughly the same amount of new originations at this time. However, 30 percent noted that they had "fewer" new originations, and another 30 percent said that they had "significantly fewer" new originations than at the same time last year.

About 50 percent of Canadian respondents said that they had "significantly fewer" new originations than this time last year, with about 30 percent noting that they had roughly the same amount.

What is very apparent from the survey is that the vehicle leasing industry throughout North America is bullish and very optimistic about the near future and beyond. This is no doubt because the consensus is that we have been through the worst of it. More than the glass half full, members of both NVLA and CFLA feel the glass is almost full! On the other hand, though, we will not know the real outcome until deferrals have ended and payments both for the deferrals and ongoing installments become due. Then we will truly see what proof is in the eating of the pudding.
Collections: Lessons From the Last Six Months
Bill Elizondo, COO of AFS Dealers, LLC
As a trainer and consultant in the LHPH/BHPH business, I have stayed true to one core value throughout my career in this industry: honoring the human factor by building relationships.

This core value of building relationships is the key to both short and long-term success. So, what have we learned during these challenging times? In sum, we have learned that our customers want to take care of their responsibilities, but do not always know how and look to us for help. In addition, we have learned that when we give specific instruction and guidance to our employees, it enhances their productivity while working remotely.

What Has Worked
1. Taking the time to gather good and verifiable information.
It's easy enough to put someone in a car and have them burning gas, but it is another thing to make sure they can still pay for that gas in the future.

We learned to verify the information that our customers provide. For example, we have seen a big increase in fake paycheck stubs. These can be purchased online for under $20.00. These sites allow an individual to use nearly identical templates from major payroll companies with the individual’s name and personal information. Due to office closures, it is difficult to verify authenticity with an HR department.

Educate your employees by purchasing copies of the templates online. Another option is to use a service like The Work Number, TLO, or Accurint to verify your customers' employment. Whichever method you choose, taking the time to verify the information will make the difference between a successful sale and a constant collection customer.

2. Remaining firm equates to consistent payments. We learned that our customers understand the importance of keeping their cars, and being firm and fair leads to consistent payments.

3. Set specific timelines and dates for customers. Following up and following through on those timelines and dates shows your customers that you are invested in their success.

If you do not stay consistent with keeping in contact with customers, they will go different directions. A good welcome call to explain all the payment options is important for success. Set up payments for the day the customer is paid. Online payments make it extremely easy for customers.

4. Remember, an unemployed or furloughed customer may still want to keep their car or buy a car.

What Has Not Worked
1. Not building relationships with your customers. Relationships pay!

2. Overlooking the need to reach out to every customer. Don't be caught off guard by thinking that the perfect payers will always pay. We found that sometimes even those great payers turned their cars back in because they did not think there were any other options.

3. Neglecting to follow up with your employees about expectations and performance when they are working from home. Setting specific daily goals is key.

In the grand scheme of things, COVID-19 has affected every one of us. Building and maintaining good rapport with your customers and ensuring both the customer and the dealers are in complete understanding of each other’s responsibilities is vital. Opening the door to communication, honesty, consistency, convenience, and trustworthiness is key to maintaining and extending your success.

Bill Elizondo, COO of AFS Dealers, LLC, has been in the Sub-Prime financing and, LHPH/BHPH business for over 30 years. He has worked for Car Financial, America’s Car-Mart, and Superior Auto in operations and senior level positions. Currently, Bill uses his expertise by consulting clients across the United States and teaches in seminars and conferences at the national and state levels.

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


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