At Eckhaus Fleet, our customers tell us they are tightly controlling fleet size. They also see higher rates in most markets, longer utilization of their fleet vehicles and a strong used-vehicle market. Airlines report the return of the business traveler, which bodes well for airport operators.

Finance is the life blood of the auto rental industry. We asked Wayne Yocum of Automobile Finance Corporation, Shane O'Dell of Dealer Services Corporation, Jeff Iverson of GE Capital, Don Hankey of Hankey Group and a rental operator as well (Midway Rent A Car) and Joe Opferman of 1st Source Bank, leaders in the auto rental financing community, about their expectations for the coming model year.

■ How are your rental customers doing?

Wayne Yocum: Our rental customers have weathered the storm and are doing well. Typically, rental operators who have maintained a disciplined approach to managing their fleets have increased DDA (Daily Dollar Average), utilization and RPU and are making good money.  An essential part of the profitability equation is having adequate financing that allows rental operators to achieve the right mix and volume; a balanced fleet.

Shane O'Dell: We find our existing RAC operators have adapted very well in the changing times. Their inventory is at moderate levels, and rental percentages are up due to tighter inventory numbers and demand. 

Jeff Iverson: I would say that our customers have weathered the "Great Recession" pretty well. For the most part, they have come through the economic turmoil in pretty good condition; at least their balance sheets seem to portray a much "healthier" business than 18 to 24 months ago.

Don Hankey: Profit is up 50 percent and business is up. Midway Rent A Car should have its best month ever. Tough financing has forced competition to go after profit and not market share.

Joe Opferman: Our customers are doing well. We are encouraging them to build their balance sheets during this period. Money is available for strong balance sheets. We have grown our outstanding loan balance over the prior year by more than 40 percent, which is a big number. That is almost $100 million. We have added many new customers and increased our exposure on existing accounts significantly. Is credit tight? Yes. Our operators should hope that it remains tight as history has proven that the industry does not have the self control to keep fleets at reasonable sizes.


■ What are your lending plans for the 2011 model year?

Yocum: AFC remains committed to its customers and their continued growth and profitability.

O'Dell: We are very pleased with the performance of our rental portfolio, which has allowed DSC to remain aggressive in this business segment.

We continue to work with several select independent agents and agent franchises in an effort to keep credit flowing for the rental dealer. Utilizing our 100 field representatives we have remained steadfast in building business synergies with major rental car companies in addition to fully servicing our existing portfolio.

Our capacity to build upon our rental portfolio is strong and directly aligned with our core initiatives. We believe this business will stay robust and continue to grow in the coming years.

Iverson: GE Capital will continue to support the rental industry in 2011. It provides a 'good mix' with our commercial fleet business and our senior leadership is very supportive of growing our rental footprint. 

Hankey: We plan to lend more funds only if it is profitable. Forget about market share!

Opferman: Credit will continue to be tight. Banks are still rushing after what they believe are the safest customers. Those customers with a good track record, good cash flow and low leverage are getting the money they need. 

What is still true is that anyone who needs large numbers of vehicles and traditionally got it from securitization of debt are not able to get anywhere near the rates they once did and the commercial paper market is not as attractive as it once was. Banks lending to the large corporations are requiring more assets to back the amount of the loan, which restricts the fleet sizes. Fleets of the largest companies are not going to be as large as they were in the past.


■ Is credit going to ease?

Yocum: Credit restrictions and underwriting guidelines will no doubt ease as the economy rebounds from the unprecedented industry events that have affected not only the U.S. but also financial markets worldwide. There is still nervousness out there. It's simply a matter of time before the full confidence of the industry returns.

O'Dell: Although the industry is currently faced with a stricter credit model, underwriting will eventually right size itself. It is difficult to say how long this will take.

Regardless, DSC's underwriting has always been flexible with a focus on operations and dealer principal experience levels. We have remained consistent with our processes focused on customizing the best program possible for our rental dealers.

Iverson: I think that the big question is to determine how the new economic reform law will impact lending in general. Digesting 2,000-plus pages of law into something that the lending industry can "operationalize" stands to make things interesting over the next few months. Everything from how companies raise capital to the capital requirements for the banking industry has to have some effect on liquidity and/or costs to do business.


Hankey: Yes, credit is going to ease. You need four things to borrow money: good balance sheet,
good P&L, good business plan and ability to take out your lender. (Find a lower cost lender. Competition will return to the banking industry.)

Ability to take out your lender might come back and this will force lenders that lose business to get aggressive.

Opferman: Will credit free up in the future? Yes.

Banks will start reaching for yield and that will bring them back to the industry. That will not happen very quickly since the recovery is not very robust.

Companies who used to have an advantage in the securitization market will need to charge more for their money, and leasing options that once supplied a large number of cars are history. I see this gradual thawing as a good thing for the industry. We stayed in the market through the bottom and we have been happy with the results both for our customers and ourselves.


■ Are there any issues you think the industry needs to address?

Yocum: Details. Be very specific about your business and defining your business model. Brag about your successes and be honest about shortcomings. The most successful rental operators are investing more of their time in ensuring that every aspect of their business is in check - right down to income statements and balance sheets. A properly aligned fleet combined with detailed financial statements tends to afford rental operators with more lending opportunities. 

O'Dell: Credit and fleet availability. Many banks and financing companies have pulled back on the amount of money that they are willing to loan in this business segment or have stopped lending to these dealers altogether, closing or locking down lines of credit that were once available for the dealer during the buying seasons. DSC has streamlined its credit process for the RAC operator to accelerate the approval process during these seasons, and has maintained relationships with fleet companies like Eckhaus to allow our RAC operators access to as many buying opportunities as possible. 

Hankey: Operators still get incentive money direct from the manufacturer and this allows them to finance over cost and put the lender upside down (negative equity). This is a big risk in the rental industry. There is no way to stop this, and this is where the banks take big hits.

Opferman: Risk versus program. With repurchase cars having longer hold periods and higher cost, most operators need to run a high percentage of risk cars. Incentives on cars have greatly diminished, so the need to buy more cars to get to the next incentive level is all but gone. Holding cars longer makes fleeting for peak seasons harder so lower fleet at peak season is also impacted by the risk versus program.

Since deep discounts on cars have been reduced significantly, the little guy has a more even playing field with the large corporations who bought volume in the past and got the highest discounts.

Fewer program cars, longer holds, and fewer lease cars all contribute to fewer cars at the auction which has made the prices very strong, which supports the risk car move and provides not only a profit with higher rates as a result of fewer cars in the total fleet, but profits when the cars are sold.

Tim Yopp is chief technology officer of Eckhaus Fleet LLC, one of the largest independent fleet suppliers representing Hyundai, Suzuki, Toyota and other manufacturers to the corporate fleet and rental car industries. He can be reached at

Mark Eckhaus is CEO of Eckhaus Fleet LLC and a principal in several new car dealerships. He can be reached at

Jack Goode is fleet manager at Eckhaus Fleet LLC. He can be reached at