The Shlomo Sixt car-leasing firm recently bought 50 Mazda 6 cars that the importer had in inventory. Thanks to a new directive from the Transportation Ministry, Shlomo Sixt will be able to sell the cars as completely new, without registering as their former owner. And the vehicles can go at a 20% discount - NIS 135,000 instead of the NIS 162,500 list price.
Such cars, which leasing firms buy from importer surpluses at deep discounts and sell relatively cheaply to private customers, have been sold as "first-hand with zero mileage" rather than as new cars. But under a directive taking effect on June 1, leasing firms and licensed auto dealers will be allowed to sell them as brand new cars without registering themselves as the initial owners.
Thus, a person looking to buy a new car will be able to compare the importer's price with the prices offered by leasing firms and dealers.
"It all began with the 2008 economic crisis," says a leasing executive. "The leasing firms encountered difficulties and the importers started stealing our business and offering cars directly to the institutional market. Then we decided to enter the private market."
Competition over private customers started out with lease financing programs offered by leasing firms in which discounts from importers were passed on to customers via easy payment terms. The final price, including interest, could be 10% lower than the importer's price.
The practice expanded; the Albar leasing firm even set up showrooms. The leasing firms then began selling new cars without financing after registering them in their names. Some were cars that importers hadn't sold within a year; others were from the leasing firms' inventories and sold without the importers' knowledge.
During the past year the leasing firms stopped hiding what they were doing and leveraged their large discounts from importers to compete with them on price, even through marketing websites.
"If until now it was perceived as a scheme, now we'll start advertising and the status quo will slowly change," says the executive.
According to David Dayan, owner of Trade Mobile, a trade-in chain, "What occurred until now will become more widespread. Weak importers will grant sales quotas to dealers and leasing firms. Within a decade the importers will focus on importing cars and we'll be the ones doing the trading."
But another senior industry source says it all depends on the cartel of car importers. "The importers won't want us to cut into their sales, but some will need an outlet," he says. "So there will probably be some differentiation. Basic cars without many accessories will be sold through dealers, and fully-loaded cars through the agency networks."
These opinions are backed by one of Israel's top importers. "The directive means a complete change in the rules of the game. In the end the same number of cars will be sold, and only the marketing channels will change," he says.
"It won't matter for the stronger car makes, but importers with their backs against the wall will use leasing firms as a distribution channel that's there if necessary. Slowly but surely you'll see makes abandoning their dealership networks .... I can try selling a family car at NIS 130,000, but if a competing car is being sold by a leasing firm at NIS 99,000, everyone will go there."
Indeed, some are reading the map correctly. Shmulik Klein, CEO of leasing firm Cal Auto, has converted three showrooms into a chain, Cal Auto New, for selling new cars. At first they'll mainly show cars sold through lease financing, but he's already selling brand new cars there.
"The importers didn't agree to anything I did," Klein says. "Israel became accustomed to monopoly, and now the cards are being re-dealt."
Leasing firms have long been preparing to become mega-dealers trading in all types of cars. Albar even puts on fairs where new cars from importers are sold side by side with used cars and lease financing plans.
The move will bring leasing firms into direct competition with car importers, but this isn't the only area where the two industries have begun competing. Leasing firms have recently penetrated the car-repair market while importers have become used-car dealers, with some even entering the operational leasing arena. All told, the winner will be the consumer.
The used-car market, for instance, has become a key link in the chain that affects the value of new cars. A reputation of being a tough second-hand sell will affect a make's new-car sales. Importers are therefore establishing networks of used-car lots. Importers Colmobil, Carasso Motors and David Lubinski all have large trade-in operations. And importers don't have qualms when car fleets want to buy cars directly or in leasing contracts.
But while competition between importers and leasing firms intensifies, the boundaries are fading behind the scenes, an indication of the risk overshadowing the revolution: concentration. The fact that many importers also own leasing operations could squelch competition between the two sub-industries.
Carasso controls Lease4U and Lubinski owns Prime Lease, while Shlomo Sixt is also the authorized importer for Opel, and Colmobil has a small leasing firm that can turn into a marketing channel. UMI, the Chevrolet importer, recently applied to the antitrust commissioner for permission to merge with Avis.
So it appears importers are getting set for the long run by branching out into leasing, used-car sales, and perhaps even trading in competing new-car models. "The Zelekha Committee said leasing firms distort the market, but the new regulations only reinforce their power," says a senior industry source, referring to a 2011 panel on the car market. "To reach individual customers I'll also buy a leasing firm, and conglomerates will arise that control the market."
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