A Q&A with Ron Romain

United’s Executive Chairman shares his insight into the car rental industry

At United Leasing & Finance, our history in the car rental industry spans back to our very beginning. Robert Romain, Sr., founded Bob’s Motor Sales in 1964 and United Automobile Leasing Service Inc. in 1965. United Rent-A-Car came soon after, growing to 32 locations across Indiana, Kentucky, Illinois, Missouri, and Texas with around 2,000 vehicles in its fleet.

Today, as a privately owned, independent equipment finance company, we use our history and experience as an operator to aid our car rental customers in growing their businesses. Read on below to hear from our Executive Chairman Ron Romain about his background in the industry, how he built his successful companies, and his advice to business owners today.

1. Can you walk us through United’s history, beginning with United Automobile Leasing Service Inc. and Bob’s Motor Sales?

Both divisions started about the same time. It was in 1964 for Bob’s Motor Sales and 1965 for United Automobile Leasing Service Inc. We started out as a pure vehicle leasing company, and through what little marketing that my father did, he was getting a significant number of inquiries for people wanting to rent a car.

When you said leasing back then, people didn’t differentiate between leasing and renting. There was nobody in our market renting cars to the insurance industry, and so his timing was good. He built relationships with all the major insurance companies and worked with their local adjustors. Then we named it United Rent-A-Car so it became more clear to customers that there was a difference between the two business divisions, United Rent-A-Car and United Automobile Leasing Service Inc.

2. How did those companies grow into what is today United Leasing & Finance?

Small to mid-size corporations needed vehicle leasing. Even today, we still have a presence in the vehicle leasing business. It’s just that we’ve added so many other elements to the business. We had all these great customers who were leasing their fleets from us and they would say, “By the way, I need financing for my manufacturing equipment, technology, office systems, or any number of business assets.”

We kept saying, “No, we only lease vehicles.” When I got out of school in 1973, I had worked in the business and remember saying to my dad, “Hey, how come we’re not financing this equipment?” He said we don’t know that much about manufacturing equipment, or any of the other asset classes we were being asked about. However, we ultimately decided, if the customer passed our credit review process, we’re going to say yes. So that’s what we started doing. That would have been in about 1976 and also when we began growing more rapidly.

3. With technology now, it’s much easier to manage a fleet. How was the United Rent-A-Car fleet managed before the Internet boom?

We used a system called TSD back at that time, and I understand it’s still around today. That was the platform we used to rent the cars. It would print the rental contract, help us manage inventory, track revenues, do month-end closes, and produce an income statement. Interestingly, printing contracts was a big deal. Previously to TSD, we had to handwrite and complete contracts manually. It was a time consuming and error-ridden process. Using automation, you just load it into the computer and hit print, and there you go. We thought that was the greatest thing ever. It made record keeping a lot simpler. Even maintenance — it would give you notifications when you needed to change the oil and that sort of thing. It tracked nearly everything and was a great little system.

4. What were some of your biggest pain points as a growing car rental operation?

As you probably expect, finding good frontline rental agents and people who know how to sell and manage your utilization rates. If we couldn’t keep our cars rented somewhere between 85% to 90% of the time, then it wasn’t a good business model. Getting the people who knew how to work and build relationships with these adjustors, they were our lifeblood. Then we got into building relationships with car dealers and making certain the service advisors were referring United Rent-A-Car. We would go in and buy them pizzas, take them to lunch, play golf with them, and do all the normal relationship building activities to try and keep that flow of business going and to grow the fleet.

We were very fortunate at United because at that time we had United Automobile Leasing Services Inc., which was leasing all these commercial accounts. We had credit lines for that line of business. We also had separate credit lines for the rental car company. That would be a critical element, I guarantee you, for anybody who is in the rental car industry today that is a relatively small rental car company. If you didn’t have the credit capacity, it would be hard to grow your business as you started needing to expand the fleet. We consciously retained all our earnings to ensure our leverage was low and attracted lenders who would then provide credit.

5. What is the best way car rental companies can scale and grow their business?

Certainly, having adequate credit facilities in place, which is what United specializes in. We can not only directly loan companies money, but we can also facilitate additional credit lines. We can do credit lines up to $20 million.

6. What are some of the common pitfalls you see with today’s car rental companies?

Probably not being adequately capitalized and a debt-to-equity ratio more than 6:1. That’s the first one. The second one would be availability of vehicles. Supply chain availability is a problem. We can also help with this issue because we own a group of dealerships. This direct source is sometimes of great value for our clients. Third is that the cost of vehicles is much higher now, so you have to put more money as a down payment in some instances just because they’re paying higher prices.

7. What was your disposal process for vehicles toward the end of their lives? Have you seen that process change with newer car rental companies?

Because we were in the car business, we had three outlets. One of them was to retail the vehicles, the second was to go to auctions and sell them wholesale, and the third was we worked with wholesalers.

It’s gotten a little better because dealers have found that rental cars are a great source of used cars and there is such a high demand now for used cars. I think it’s something like 40-plus million used cars are sold a year. If you think about it, there has been a huge dip in the number of new cars sold. The new car industry used to sell 17 million new cars a year. During COVID, it sold like 9.5 to 10 million. Then right after COVID, it improved slightly and sold 11 or 12 million. For three or four years there, the number of new cars sold was really reduced, which means that there aren’t as many used cars in the market. So rental cars were one source of inventory for both new and used car dealers, and prices have been great for anybody who owns used cars to dispose of. That’s been a big deal.

8. Many lenders shy away from lending in the car rental industry. Why does United Leasing & Finance want to stay and grow within the industry?

Because we’ve been in it, we’ve understood the business since 1964, and we’ve never exited the business. We’ve been a consistent lender in this space for 59 years. We have always respected the rental industry and the people who work in that space. We’ve been part of it ourselves, both as an operator and a lender. It makes it a lot easier to do business when you truly do understand a given industry.

9. Why should car rental business owners choose us for their financing over other lenders?

One thing that is a bit of an advantage for us is the fact that we have low-mileage preowned cars we will finance and put in a fleet. We have an almost endless supply of preowned vehicles through our network of dealerships, auctions, and wholesale sources that we can buy from. Most banks won’t finance new and used; they’ll only finance new. That is a huge differentiator for us. We also lend nationwide, and that is a big advantage for anyone looking to expand.

We have full reconditioning capabilities. That is something else that is an advantage of United. If you are one of our customers and you want to dispose of your vehicles, we have a complete network of reconditioning centers that will recondition your car and maximize the value. If you take a car right out of rental service, it has knicks, dings, soiled carpets, and everything else. If you just take it to the auctions, you’re going to really hurt the value if it is not in the best condition. Having us recondition it within the parameters that the customer wants to spend is a value add.

We’re privately owned, so we can be more flexible than bank-regulated lenders. We do also offer assistance and advising with licensing and registration, regardless of what state it is in. Electric vehicles — having someone willing to finance electric vehicles. We have no fear of that.

10. What are some of the most common questions customers have about car rental financing?

Structure, meaning what is the amortization requirement going to be? We really help guide them on that. You can have two $40,000 cars, and one of them will depreciate 2.25% per month and the other car might only depreciate 2% or 1.75%. Because we’re in the market every day, we know which cars are best to use and make recommendations to our customers so they don’t end up spending more money on depreciation than they should. That is just part of our package of services. There are 10 different SUVs out there. Which one should I buy? Well, there’s depreciation that is real money, and we can help make that determination as to which one is the best. I said structure, which would be things like the loan term. How long are we willing to go? Usually on a rental car, it’s no more than 36 months.

11. In today’s economy and financial climate, why is financing still an important tool for car rental companies?

With what happened with Silicon Valley Bank (SVB) and how banks have pulled back from lending, because it’s a highly regulated industry, banks tend to run hot and cold. United does not do that. We’ve been consistent even through COVID, through the 2008 significant recession, and through every recessionary period over these last 59 years. We’ve always been open for business, and banks tend to run hot and cold. They change everything from their advance rates and interest rates to down payment requirements and their appetite to loan in any given industry.

The other reason I would say is because, if you want to grow your business, you have to have capital resources, lending resources. You have to have that. Right now, the rental car industry isn’t going anywhere. We’re still bullish on it.

12. With your experience in the companies you’ve operated and all the fleets you’ve managed, what is your advice to car rental business owners today?

Build equity in your business. If you build equity in your business, retain your earnings, and improve your balance sheet, you will be very appealing to most any lender, which allows you then to grow your company. But if you extract earnings out of the business all the time and your balance sheet is moderate to weak, you’re going to really struggle growing your business.

At our company — and this sounds astounding but it’s true — we didn’t take any money out of this company until probably 40 to 50 years in. We retained all our equity in the business, and here we sit 59 years later. I see it so many times with smaller businesses. They can’t wait to buy that new boat, that new car, or that new house and put in a swimming pool. It’s not so much about how to be great at renting cars. That is a skill you either have or you don’t, I suppose. Or how good a marketer you are and that kind of stuff, to me, is a whole different discussion. But if you can underpin the business with a really good financial statement, you’re going to be able to grow.

Secondly, what was most important to us was being a selling organization. Everybody was in full sales mode all the time. We had these young men who would be out delivering cars, and we had an insurance product that we wanted sold. We had to teach them how to sell it. We were trying to sell the relationship. “Hey, if you ever need a car again, be sure to think about United Rent-A-Car and here’s why.” Being a selling organization — everybody in the company — that really did help us. It was all about sell, sell, sell.

About United Leasing & Finance

Founded in 1964, United Leasing & Finance is an independent direct lender committed to providing equipment financing solutions to businesses across the U.S. and Canada. Our experienced team of finance professionals shares a passion for helping businesses grow. We understand every business is unique, which is why we work closely with our clients to create custom financing solutions tailored to their specific needs. With almost 60 years of experience, we’ve built a reputation for being a trusted partner to businesses of all sizes, from small businesses to Fortune 100 companies. Partner with us to see how we can help your business grow.