Newspaper Story: Our client Leasebusters was featured in this front Page Business Section Story July 23rd, 2007. http://www.wheels.ca/article/30161
Auto buyers’ new lease on life
After two decades in the car leasing business, salesman Jim Matthews says he’s perfected the art of the deal.
The co-founder of Leasebusters Inc. has developed a “win-win” solution for people looking to get out of their existing car leases by arranging hassle-free transfers to eager new customers via a quick pit stop on the information superhighway.
The strategy, which connects buyers and sellers on the company’s website, effectively sidesteps hefty penalties for early lease termination that could easily cost thousands of dollars.
While the new customer snags a bargain, the original dealer gains a replacement client that they can potentially sell a new car to down the road.
“Our job is to help people get out of their existing vehicle lease by finding someone else to take it over,” said Matthews, who is also the company’s general manager. “Thus eliminating the lease negative equity, or lease deficiency, at a full-scale national level.”
There are about 500,000 new retail leases signed in Canada each year, Matthews said.
With the average term at four years, he estimates there are about one million prospective customers who would consider getting out of their leases somewhere after the first six months and before the last six. And they may choose to do so for a variety of reasons, including big life changes such as marriage, divorce, a new job or a simple desire to upgrade their car.
“Even if your objective is to get 10 per cent of the available million per year, that’s a 100,000 lease transfers per year – that’s huge,” he said.
Leasebusters – established in 1990 – arranges about 11,000 lease swaps each year.
It rang up about $3 million in total sales during its last financial year, which includes revenue from client and dealer fees, used vehicle sales and online advertising. Its pre-tax profit for the year ended July 2006 was about $400,000.
Leasebusters has a staff of 22 with a head office in Mississauga and a satellite bureau in Montreal.
Sitting in his office, bedecked with all the effects of an auto enthusiast, Matthews credits the Internet for putting the business into high gear over the last decade. The company’s bilingual website, leasebusters.com, features over 2,000 vehicles and traffic to the site numbers about 120,000 hits a month.
“For 10 years, we were a nice tidy local company,” Matthews said, noting the website has replaced the need for more traditional bricks-and-mortar offices.
“We look the same in Abbotsford, B.C., Gander, Nfld. or downtown Oakville because the front of your office is your homepage.”
In 2001, the company launched its dealer affiliate program to formalize the involvement of new car dealers in its lease-takeover process.
That was followed by a strategic alliance with GMAC, the country’s largest factory leasing company, that was struck last year. Under that deal, GMAC effectively sells the Leasebusters service to GM and Subaru new car dealers across the country. The goal is to help existing customers get out of their leases early so they can get into new a GM or Subaru ahead of schedule.
“We have established a third method of vehicle acquisition,” Matthews said, noting people were previously limited to buying or leasing new or used cars. That, along with its virtual marketplace, is arguably the company’s biggest success to date, he said.
Its biggest failure has been its inability to capitalize quickly enough on the red-hot growth in Western Canada, while its biggest challenge remains copycat competitors who “tarnish the lease-takeover industry by not being a stable organization that offers a credible service.”
Leasebusters now has its sights set on converting more used-car buyers into potential lease-takeover customers – an idea that is winning praise with the country’s beleaguered auto manufacturers because it allows them to sell more cars to the “newly liberated” lease customers.
When reflecting on the company he help found with a $10,000 personal line of credit, Matthews muses: “I was thinking big.”