MANAGING 10-50 COMPANY VEHICLES
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A New Way to Finance Rental Fleets?

With the cost of capital at a staggering 12-15 percent today, two rental car company announcements to lease fleet vehicles provide an indication as to how deals will get done moving forward.

Commercial Leases are Now Eligible Collateral to be Funded by TALF Program

The credit gridlock gripping the nation's economy has made it more difficult (and expensive) to fund fleet vehicles using asset-backed securities. Last February, the Federal Reserve and the U.S. Treasury launched a joint program called the Term Asset-Backed Securities Loan Facility (TALF) to improve credit conditions in the securitization markets. On March 3, the Federal Reserve expanded the definition of eligible collateral under TALF to include commercial leases. Here's how the program works.

Credit Gridlock Will Impede Sales of Used Fleet Vehicles

The bread-and-butter customers of out-of-service fleet vehicles are buyers with C and D credit, namely subprime buyers. However, funders have tightened underwriting standards to manage these higher risk borrowers. Some lenders have caps on how low a FICO score they are willing to fund, which is often above the threshold of subprime borrowers. If this continues, it will have significant long-term implications for the sale of used fleet vehicles.