Automakers want Ontario showrooms opened to deal with expiring leases

Trish | April 17, 2020 More

(Photo by Mark Renders/Getty Images)

Facing an onslaught of customers returning leased vehicles, some automakers are calling on Ontario to reconsider rules forcing the closure of dealership showrooms during the COVID-19 pandemic.

“Our dealers are now dealing with record numbers of lease returns at our peak season and they are unable to process them,” Hyundai Canada CEO Don Romano wrote in an email. “Most customers are being told to call the financial companies and extend. Finance companies are overloaded and unable to manage the calls. Many customers don’t have incomes and can’t drive due to the stay-at-home requirements. Therefore, many customers simply want to return their cars, but they can’t.”

Between 35,000 and 40,000 leased vehicles were expected to return to the Canadian marketplace each month between March and June, according to an estimate by Canadian Black Book. Those lease returns are made complicated by the coronavirus pandemic, especially in Ontario, which has shut down dealership showrooms as part of its effort to slow the spread of the virus.

SHOWROOMS REMAIN CLOSED

Earlier this month, Ontario extended its stay-at-home order through to May 12, and broadened its definition of non-essential businesses to include in-person vehicle sales. Showrooms have been closed in Canada’s largest province since April 5, though dealerships are allowed to keep service bays open to provide essential repairs.

“During this period of uncertainty, our government is continuing to make appropriate changes as the situation evolves while following the advice and guidance of industry experts and public health officials,” a spokesperson for Vic Fedeli, Ontario minister of economic development, job creation and trade, said in an email to Automotive News Canada. “The update to the [essential businesses] list is the result of that ongoing monitoring, and reflects our efforts to support our public health officials’ work to stop the spread of COVID-19 while ensuring the continued operation of critical supply chains.”

Tim Reuss, president of the Canadian Automobile Dealers Association (CADA), said dealers should focus on boosting online sales when public health experts recommend showroom closures.

“Dealer associations are in favour of opening full dealer operations where public health advice supports that move,” Reuss said in a statement. “Where public health advice does not support sales being open, we have been focused on facilitating safe online sales and keeping essential service and parts operations running.”

But, Romano urged the province to reconsider the showroom shutdown, saying the ability to close a transaction in-store would be crucial in some situations.

Keeping showrooms open on an appointment-only basis, perhaps limited to only one customer at a time who would speak to a salesperson behind plexiglass, would help dealerships provide vehicles to essential workers, he argued. He said he envisioned much of the paperwork being handled online, with the in-store experience limited to collecting signatures and identification and getting a proper trade-in appraisal, if necessary.

“We’re not going to sell enough cars to make a difference economically for us, but we are going to take care of those customers that are calling us every day and asking, ‘What do I do?’

“I don’t know what to do for them, and I think forcing dealers to send their salespeople to homes is not a safe and sound option right now, unless it’s someone they know,” Romano said in an interview with Automotive News Canada.

INFLUX OF VEHICLES

Easing closure rules could also help dealers manage an influx of vehicles coming off lease, he said. While many customers might opt to have their leases temporarily extended due to the crisis, some would prefer not to extend because they might be recently unemployed or no longer need a vehicle.

David Adams, CEO of the Global Automakers of Canada (GAC), said many of the association’s members would support such a measure in Ontario, provided dealerships move with “an abundance of caution” and make health their No. 1 priority. He said the GAC, which represents 15 automakers’ Canadian operations including Hyundai, Honda, Toyota, Volkswagen and Nissan, had yet to have discussions with the provincial government on the topic.

“Dealers can already sell vehicles on a remote basis, but there are some challenges sometimes with signatures and certification and that sort of thing. And that’s the sort of thing an in-person set up would address,” Adams said.

Romano argued that allow customers into a controlled environment, such as a well-scrubbed dealership with appropriate social distancing measures in place, would be safer than having employees drive to different locations to drop off new vehicles.

“That environment is significantly better equipped, safety-wise, than almost all other essential services that are open today,” Romano said. “For those of us that have been in supermarkets or gone to pharmacies, you’re still taking a big risk. You’re not able to get the type of social distancing that you’re looking for. What we’re advocating for is complete social distancing… One person in an entire showroom who’s dealing with one other person behind plexiglass.”