It has been an incredible 2009 so far in the automotive industry with inconceivably two of the “Big 3” going into and coming out of bankruptcy protection.  Purse strings are still fairly tight on the credit side restricting the way companies were used to doing business in the mid 2000’s. We have all had to change business practices over the past two years and I believe out of these changes will come obviously resilient but also more efficient organizations regardless of sector.

While most have been disgruntled by all the bad news others have been able to take advantage of some positives that are occurring during these tumultuous times including you the customer. Because of the shortage of vehicles both in new and used and the fact that consumers are still uncomfortable with the state of the economy, those looking to replace or just purchase, for the most part are leaning towards used to save some money. Although most dealers have cut back on the amount of inventory they carry, they still need to have some around for potential retail sales and that is why the auction conversion rates and prices have been the highest we have seen consistently in decades. As we speak, there simply are not enough decent vehicles around to meet the consumer demand.

Now we need to realize that we are not out of the woods yet as the prices are only up slightly from where they were a year ago at this time and nowhere near where they were two to three years ago but prices are up none the less. The more surprising thing to me, and most others involved in remarketing is that the prices have remained high all year long. The volumes that were expected to hit the market have not (but we hear they are coming) which has contributed to a greater demand than supply driving prices up.

To illustrate, the auctions conversion rate (nationally) is at 82% as of June 30^th compared to 74% at this time last year. The Foss numbers show even more improvement, as we are just under 70% compared to a disappointing 55% one year ago. Even more impressive is the fact that our average km’s on units sold has increased but so has our return by over 5% over our 2008’s numbers. In other words we are selling higher mileage vehicles for more money this year.

After the first half of the year Foss National Leasing is converting at a 3.5% higher rate than our immediate competition as well, our average return rate (or sale price) is 10% higher than the competition even with an average of 20,000 km’s more per vehicle. These statistics can be attributed directly to us supplying maintenance and vehicle history reports. We have preached for years that the dealers will pay a more if they know what they are getting and here is the proof.

That leads me to another very important topic, which is the issue of the changes in the Ontario Motor Vehicle Dealers Act (M.V.D.A) that was to become official this past April but has been extended to January 1, 2010. In a nutshell changes that will affect us all is FULL DISCLOSURE on all units sold. I have supplied O.M.V.I.C.’s  web address (www.omvic.on.ca) for those of you who want to learn more. We also hope to have a session in which you, the clients can attend and ask questions that pertain to your fleet.

While the combination of our maintenance history reports and CarProof vehicle history reports will capture most occurrences while the vehicle is in your driver’s care it does not capture all accidents or repairs done to the vehicle. It is imperative that you educate your drivers to report ALL incidents to you so that you can inform us to declare upon disposal or we expose you and ourselves to a time consuming, very costly procedure of recourse. If the undeclared incident can be proven that it occurred during the term of the lease the vehicle will come back to us having to resell possibly costing your company thousands of dollars! I can’t stress enough the importance of beginning to train your drivers to report EVERYTHING to you and this information needs to be passed on to Foss National Leasing as we will not be held liable nor will we incur any costs involved in transaction recourse for non disclosure issues.

Enjoy the rest of your summer and unlike the temperature so far, let’s hope that the conversion rates and prices remain high.

Again, I invite you to contact me directly with any questions, cares or concerns regarding the above or any remarketing issues that you may have.

Regards,

Todd Ritza

Vehicle Remarketing Manager

Foss National Leasing

tritza@fossnational.com

905-709-7686

L’année 2008 s’est déroulée tel que nous l’avions prédit, alors que le prix des véhicules usagés a chuté à un niveau non connu depuis cinq ans. La parité du dollar, la saturation du marché, le prix du carburant et, évidemment, la situation économique ont été les facteurs prédominants.

L’année 2009 a repris agréablement au cours du premier trimestre, grâce au volume limité de marchandise usagée. Il y a une pénurie de véhicules disponibles pour location pour deux raisons. Premièrement, les locataires optent pour l’extension plutôt que de subir les pertes significatives associées au remplacement et, deuxièmement, les contraintes sur le crédit ont empêché les fournisseurs de pouvoir remplacer les véhicules au rythme qu’ils auraient voulu.

Le nombre de véhicules à louer disponible en ce moment sur le marché a diminué considérablement parce que les fabricants se retirent du programme de rachat, faisant ainsi que les entreprises de location se retrouvent responsables des résidus. En conséquence, les entreprises de location ont décidé de se servir de leurs véhicules un peu plus longtemps pour que la dépréciation en minimise l’écart.

Les reprises sont de plus en plus rares, tout simplement parce que les ventes de véhicules neufs n’ont pas été à un niveau si bas depuis des décennies, diminuant ainsi l’inventaire en véhicules usagés chez les concessionnaires.

Chose certaine, c’est qu’éventuellement tout véhicule doit être remplacé et il semble que les consommateurs, sensibles à l’incertitude de l’économie, décident d’acheter de l’usagé plutôt que du neuf. De ce fait, nous connaissons un premier trimestre positif et rafraîchissant dû à la hausse de 6% des prix de vente de véhicules usagés depuis décembre dernier, et de tout près de 10% depuis juillet dernier. En toute sincérité, ceci est le premier brin d’optimisme observé dans le secteur automobile depuis près de deux ans. Malgré avoir prédit que les choses allaient tourner mal, ce serait plus que de la modestie de ma part si je disais que nous avons été naïfs devant la sombre réalité que le futur nous réservait. Nous vivons une période historique.

Malheureusement, je prédis que ce petit rayon de soleil ne brillera pas longtemps et que les choses vont empirer avant qu’elles ne reprennent pour de bon. Éventuellement, les entreprises de location n’auront pas le choix de remplacer les unités, les fabricants ont une somme record de retours de location prévus pour les prochains 12-18 mois, ce qui représentera un marché saturé. Par expérience, nous savons qu’un marché saturé a un effet adverse sur les gammes de prix. Le prix du carburant et le nombre de perte d’emplois commencent à grimper, le niveau de confiance des consommateurs connaît une baisse sans précédent et nous n’avons même pas encore abordé le sujet des « 3 » fabricants majeurs domestiques et leur sort. En tout et partout, 2009 ne s’annonce pas prometteuse.

Le seul élément positif par rapport aux véhicules usagés est la baisse du dollar canadien, ce qui a motivé les acheteurs américains à revenir au Canada. Malheureusement, cet aspect aura peu sinon aucun impact sur un véhicule de parc quelconque, car les acheteurs américains qui reviennent semble s’orienter vers l’achat de véhicules de luxe ou les utilitaires sport plus amples, paradoxalement les mêmes sortes de véhicules qui étaient expédiés chez nous, alors que nos devises étaient comparables.

En somme, la diligence s’impose lorsqu’il s’agit de gérer son parc car les prix de véhicules usagés baisseront encore plus qu’ils ne l’étaient l’an dernier. Avec l’introduction du programme de

Facilité canadienne de crédit garanti

Tout à chaque un ici a le mandat de gérer les coûts de la façon la plus rigoureuse possible pendant cette période très difficile. Pour vous, ceci veut dire que vous avez tout intérêt à vous fier aux experts pour vous aider à prendre des décisions difficiles. Ce n’est pas que Foss National Leasing veut s’attarder sur la situation de façon négative, mais c’est plutôt que nous voyons en ce moment l’occasion de les décortiquer afin de trouver des alternatives dans la gestion des parcs pour franchir cette période d’adaptation aux changements dans l’économie.

Comme toujours, je vous invite à communiquer avec moi pour vos questions, vos soucis et vos intérêts par rapport à l’aspect de la mercatique de relance de votre parc.

Salutations cordiales,

Todd Ritza (905-709-7686)
Directeur de la mercatique de relance automobile

tritza@fossnational.com

2009 has rebounded nicely in the first quarter due to a low volume of used product. Lease vehicles are in short supply for a couple of reasons. One, lessees have chosen to extend as opposed to replace to avoid large disposal losses and two, credit constraints have restricted the ability of the suppliers to replace vehicles as quickly as they would like.

The amount of rental vehicles that are currently available in the marketplace is down substantially due to the fact that the manufacturers have moved away from the buyback program therefore leaving the rental companies responsible for the residuals. With this being the case, the rental companies have decided to utilize their vehicles a little longer than usual to allow depreciation to catch up.

Trade-ins are way down for the simple fact that new vehicle sales are at the lowest level we have seen in decades which obviously minimizes the amount of used vehicles coming into the dealerships.

As we all know, vehicles eventually have to be replaced and it looks as if the consumers, most likely because of economic uncertainty have decided to purchase used as opposed to new. This has lead to a refreshing, positive first quarter that has seen used vehicle pricing rise 6% since this past December and just under 10% since last July. Truly the first bit of optimism I have seen in the auto industry in almost two years. And while we predicted that things were going to become bleak, I think I would be understating if I said that we were naïve as to how bad things were really going to get. We are in the midst of historical times.

Unfortunately, I predict that our optimistic balloon is about to burst and that things are going to get worse before they get consistently better. The rental companies are going to have to eventually replace units, manufacturers have record amount of lease returns coming over the next 12-18 months, which will mean a saturated market. We know from past experiences that market saturation has an adverse effect on pricing. Fuel prices and unemployment are on the rise, consumer confidence is at an all time low and we haven’t even discussed what is happening to the “Big 3″. All in all, 2009 is not looking promising.

The one positive as far as used vehicles are concerned is the drop in the Canadian dollar, which has lead to U.S. buyers coming back into Canada. Unfortunately this will have little, if any impact on the average fleet unit as they seem to be up here purchasing higher end vehicles or larger sport utilities, ironically, the same type of vehicles that were shipped up here when our currencies were comparable.

To summarize, we need to continue to be diligent when it comes to managing your fleet as used vehicle prices are going to drop even lower than they were last year. With the federal government introducing the CSCF (Canadian Secured Credit Facility) in its recent budget to help stimulate vehicle and equipment leasing, it will hopefully remove the handcuffs from the leasing companies and enable us to respond to your vehicle needs. But if this does come to fruition, as there is still a lot that has to be done before anybody sees a penny, we still need to ask ourselves is this the right time to replace? You need to understand completely the ramifications of replacing units simply because their term or mileage is up, particularly as we move closer to the introduction of the 2010 models. Extending your vehicles and absorbing minimal maintenance costs as opposed to large disposal losses could ultimately save your company thousands of dollars.

Each and every one of us has been mandated to manage costs to the absolute best of our ability in this very trying time. This means that more than ever you should rely upon the experts to assist you with these difficult decisions. Foss National Leasing is not dwelling on these times in a negative manner but rather, embracing them as an opportunity to explore alternative ways to manage fleets while we are adapting to the economic changes we are currently facing.

As always, I invite you to contact me directly with any questions, cares or concerns you may have as it pertains to the remarketing aspect of your fleet.

Regards,

Todd Ritza
(905-709-7686)
Vehicle Remarketing Manager

tritza@fossnational.com

Many consumers fall victim to dishonest dealers who misrepresent used vehicles; from tampered odometer to rebuilt vehicles.  This is one of the main reasons why we should protect ourselves and do our due diligence prior to purchasing any used vehicle.  Below are some of the things to consider the next time you’re in the market for a used vehicle.

Vehicle history – it is important to know if the vehicle has been involved in any accident, junked, salvage, rebuilt or stolen.  As a buyer you have the right to know what type of vehicle you’re about to purchase.

Proper Inspection - make sure the vehicle is inspected by a certified technician.  Have them check for any signs of leakage or accident.

Odometer Reading – some sellers turn odometers back to get more profit for the vehicle.  According to AutoFacts one in ten vehicles has this discrepancy (both U.S. and Canada). You can protect yourself by obtaining a complete vehicle history report.

Vehicle’s Registration – make sure the vehicle you are buying is registered in the name of the seller.  Also ensure that the VIN (Vehicle Identification Number) that appears on the registration matches the one found in the dashboard.

Outstanding Liens - finding out if there is a secured 3^rd interest on the vehicle you want to purchase is very important prior to purchasing the vehicle.

Recalls - to find out if your vehicle has any outstanding recall, you may visit the Transport Canada website. The information on their database is based on makes and models and not VIN specific.  If you want to obtain a recall information based on the Vehicle Identification Number (VIN) of the vehicle an Auto Facts vehicle history will provide you that information.

Avoid “Curbsiders” – pose as private individuals, but are actually in the business of selling vehicles that are damaged, stolen, odometer-tampered or have liens against them (OMVIC).  Check for the UCDA logo at your local dealer.  You may also visit the UCDA website to confirm that the seller is a licensed dealer.

Never Pay Cash – make sure to pay with a certified cheque or a bank draft with the seller listed as payee.  This will ensure that you have a record of payment.

Warranty – ask for at least a 30-90 day warranty if you’re buying from a dealer.  Make sure the warranty is documented and never take any verbal commitment from the seller.

Sources:

http://www.apa.ca/template.asp?DocID=136
http://www.omvic.on.ca/news/archives/news_releases_archive/news_release_2004-02.htm
http://www.tc.gc.ca/roadsafety/recalls/search_e.asp
hhttp://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20070427/wfive_apasurvey_070427/20070428?hub=WFive
http://www.ucda.org/index.html
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080307/wfive_apa_080307/20080307?hub=WFive
http://www.cbc.ca/consumers/market/tips/usedcars.html
https://www.carproof.com/Default.asp

One of the initial questions that McLaughlin asked Corcoran and Ritza dealt with the declining value of the U.S. dollar in comparison to other global currencies, including the Canadian dollar.

“The continuing (decline in) the U.S. dollar is going to put pressure on everything we’re doing,” Corcoran responded. “We’ve faced challenges. The U.S. importation of vehicles is only going to hurt us on high-end vehicles.”

A favorite topic during the conference, McLaughlin also asked the panel about how residual values can be protected.

“The key is exposure (when selling it),” Ritza commented. “Get the vehicle in front of as many people as possible.”

Ritza also stressed the importance of vehicle history reports and providing as much information to the consumer as possible. He noted that a vehicle’s history and condition is the biggest question consumers have.

“Provide them with the story of the vehicle,” Ritza noted. “Many, many times, dealers at the auction have come up to me and said that there’s true value in vehicle history.”

The panelists were also asked about advances in remarketing and where the industry has seen the biggest innovation.

“The one I’ve seen have a big impact is simulcast. It eliminates some of that regional arbitrage and exposes vehicles back to people at the office,” Corcoran noted.

Ritza indicated that he utilizes ADESA’s remote seller, as did Corcoran.

But even with advances in technology, Corcoran stressed the value of being physically present at sales, if at all possible.

“We just feel being on the ground is key to the transaction process,” Corcoran noted. “We believe in putting feet on the ground wherever possible.”

So, what then are the opportunities for the rest of 2008?

“I think we’re going to have to be more innovative in the way we are selling,” Corcoran commented. “The opportunity is, you need to take advantage of every tool you have. You need to understand what’s out there.”

Along those same lines, McLaughlin asked the panelists about their specific goals in terms of advancing technology.

Ritsza emphasized tools that can “maximize the exposure for my product.” Meanwhile, Corcoran touched on the need for innovation that can improve such processes as follow up and delivery.

In closing, the panelists urged attendees to pay attention to what’s selling the best, along with also recommending to always present vehicles in the best manner. Essentially, pay careful attention to every detail in the sales process and consider where and how a vehicle is sold.