Pay-as-You-Go-Driving

Rent-a-car has become a part of the U.S. businessman's language. But now it is car leasing, most commonly for a two-year period, that is getting an increasing share of the play. In the past five years, the number of cars under lease has doubled to more than 600,000 and created a new industry that takes in $750 million a year. The market for leasing looks so promising that some 3,000 companies have gone into the business. Some do nothing else, such as Baltimore's Peterson, Howell & Heather, Chicago's Wheels Inc., or New York's Lease Plan International. But the market also includes local auto dealers, finance companies, established auto rental firms (Hertz, Avis, Kinney, National)--and even Detroit Automakers Ford and Chrysler.

Cars such as Chevrolets and Fords lease for $70 to $125 a month; depending on whether the customer wants insurance coverage and maintenance included. Since renting a car for two years at about $100 a month makes little sense for an individual--he could buy his own car for $2,400 and keep it longer--leasing firms usually do not aim at the general public. By far the biggest lease customers are corporations (which lease one-fourth of their total auto fleet). For them, leasing is almost always a saving. For one thing, they do not have to tie up capital. The Denver & Rio Grande Railroad concludes that by leasing instead of buying a fleet of 150 cars, it frees $450,000 a year for other investments. Corporations often want to be spared the bother of buying, maintaining and keeping insurance on a fleet of autos, and are able to write off their leased cars as a business expense rather than having to take a less favorable depreciation allowance on their own cars.

Predictions are that auto leases will account for between 25% and 50% of the new cars sold by 1970. The profitable business of leasing has already attracted some operators who are short on financing and ethical standards, forcing legitimate firms in car-happy Los Angeles to set up their own advertising code. Competition among leasers has become so stiff that some companies make only about $6 a year per car; whether they show a profit at all frequently depends on what they can get for their autos on the used-car market after the lease has run out. And just as the individual customer is out of place in car leasing, so is the entrepreneur who hopes to start with a few dozen cars: many auto leasers insist that a newcomer needs at least 500 cars to make a go of the business.

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