New Lease

Ever since the new credit restrictions put car sales into a slump, auto dealers have been looking for a way to bring them back up. Last week two San Francisco auto dealers thought they had found it. Instead of selling cars under the new controls, which require a one-third down payment and the balance in 15 months, they were leasing cars to all comers. The dealers: James F. Waters Inc., which claims to be the largest Plymouth-De Soto dealer in the U.S., and Transportation Lease Co., an organization of 32 Ford dealers.

To make sure the scheme was okay, Translease checked with San Francisco's Federal Reserve Bank. FRB said okay--as long as customers are not permitted to apply rental payments towards buying the car. Both companies had been leasing fleets of cars to business firms for some time. But with credit controls they thought private-car leasing looked much more profitable.

The plan was the brainchild of Robert Waters, son of the company's president and nephew of the founder. He already has more than 300 leased cars on the road, and is averaging 75 new leases a week. Under Waters' plan, the lessee gets a brand-new car with radio and heater for a $50 deposit, pays an average rental of $72 a month, tax deductible if the car is used for business. Waters picks up the tab for repairs and servicing. The car user pays only for insurance (collision and liability), gas and oil. After 18 months, by which time he has paid $1,300, the lessee can exchange his car for a new one.

The monthly rentals, said Bob Waters, are high enough to guarantee a profit of $200 on each car. Though this averages less than half of what he makes on a straight car sale, he thinks it's better to take the smaller profit and keep the cars moving. When the lease is up, Waters expects to sell the car for about 65% of its original cost, possibly even to the lessee.

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