Harold Somerville had plans and dreams when he left the family farm at the age of 17 and moved to Toronto to seek his fortune. His first job in the big city was at an automobile dealership, answering the switchboard. Somerville was a smart young man, and as he funnelled phone calls to the sales staff, he kept his ears and eyes wide open. From his post at the switchboard, he learned which salespeople were getting all the calls, and he watched their techniques. Soon he was promoted to the floor and moved up quickly within the company. It wasn't long before he and a partner opened their own dealership. 

     One phone call today to Somerville National Leasing & Rentals Ltd., almost 50 years after Harold Somerville founded his independent leasing company, is a clear reminder of 

President and Owner Bill Somerville (right) and Vice President/General Manager Doug Moore

his passion for excellence and commitment to the customer. One phone call is all it takes to know that the qualities Harold Somerville built his company on are in strong evidence today.

    Somerville National Leasing & Rentals Ltd. is headquartered in a 12,000 sq. ft. facility in Toronto. Three companies are devoted to the automotive business: Somerville Leasing, Somerville Rentals, and Somerville Sales.

     The leasing business has five locations: three in the city of Toronto and two in the province of Alberta, in Edmonton and Calgary. 

Harold Somerville's son, Bill, has worked at Somerville National Leasing & Rentals since 1977 and is now the company's owner and president.

 He explains how the company went from being an automotive dealership to an independent leasing company: "In 1951, a gentleman from South America came to Canada and wanted to use a car for six months, then return it with a guaranteed buy-back. My father set up a conditional sales contract that stated if the customer did a certain mileage within a certain time frame and returned the car on a specific date, he would charge him so much per month. They shook hands on it and drew up a contract, though my father wondered if it would stand up in court."

     The customer worked for a tire company based in South America, and when he returned, he put up a notice on his company's bulletin board about a new way to rent cars in Canada. "All of a sudden," laughs Bill, "my father was inundated with postcards from employees of this South American company requesting cars to use for the time they would be in Canada." Harold Somerville saw the opportunity.

Somerville National Leasing & Rentals Ltd. headquarters is located on a major highway in Toronto.

     Thirteen years ago, Somerville had 425 vehicles in its lease portfolio. Today, it has 2,700, in addition to the rental and finance fleets. Half of these vehicles are leased by individual consumers; the other half are fleet leases, ranging in size from 2 to 40. 

    Vice President and General Manager Doug Moore attributes the company's growth to what he calls Somerville's "secret weapon"--its 90 employees, 20 of whom are devoted to the leasing business. "Our success comes from people, starting right from the car jockeys all the way up the line," he says. When hiring employees, Bill Somerville looks for

compassion, interest, honesty and integrity. "This is what our company represents," he says. Somerville makes a point of saying "our company" when referring to Somerville National Leasing & Rentals. "I don't like to consider it my company," he says. "It belongs to everybody who works here."

     To that end, both Somerville and Moore maintain an open-door management policy. And it is clear to each employee that every customer is their customer, and they are focused on providing the best services and programs.

     Somerville and service are synonymous in the Canadian automotive industry. Primary services include fleet and individual leasing - both short and long term, non-maintenance and full-maintenance leases, a lease plan for company employees and association members, and daily car and truck rentals. Auxiliary services include fuel and maintenance discounts available through a corporate rate card, preferred rental rate for lease customers, insurance quotes and warranty work done right on the premises. 

    Fleet Management -- The fleet management program includes recommendations for vehicle cycling, maintenance schedules and control of vehicle expenses. Somerville believes that the important difference from one leasing company to another is the lease itself. "It is the lease that the customer is really buying, and it is only as good as the leasing company name that is on it."

    Full-Maintenance Lease -- The Full Maintenance Program is very popular with customers. Full maintenance leasing takes care of all scheduled maintenance and repairs, right down to the oil. A fixed monthly payment allows the lessee to control maintenance and operating costs.

Leasing customers can go to Somerville's state-of-the-art, six-bay service facility staffed by factory-trained mechanics for warranty work. Somerville's arrangement with General Motors of Canada, Ford Motor Company of Canada and Chrysler Canada for in-house warranty work to be done by Somerville's mechanics saves the customertime and expense. The service began as a natural outgrowth of the rental business. Bill Somerville says, "The downtime associated with sending a rental car to the dealership was too costly for us, so they allowed us to do our own maintenance on our daily rental cars and full-maintenance lease vehicles."

    Benefit Lease Plan --  Some time ago, Somerville hit upon 

Darryl Cowan, a licensed mechanic, works on a leased vehicle in Somerville's service facility.

another service which would compete with the large fleet lessors, many of which are based in the U.S. These big brand name leasing companies provide fleets of 300 vehicles or more to clients across Canada. Moore notes, though, that many of these leasing companies do not extend their service to their own customers' employees. "So we've gone to these companies and said, 'We can't compete with your fleets on the road, but we would like to approach your employees and give them the equivalent of what they would have in a fleet program.' "

    Vehicles are purchased at wholesale cost, with all dealer and manufacturer fleet rebates and cash incentives passed on to the lessee. These fleet rebates are generally not available to individuals, but as a company employee or association member, they can be obtained through Somerville's Benefit Lease Plan. Eligibility is determined by the company or association.

    While connected to Somerville National Leasing & Rentals, Somerville Auto Finance has its own operation and its own P&L statement. Established to lease vehicles and arrange financing for people with specialized credit needs, Somerville Auto finance helps people establish, or reestablish, their credit rating by financing dependable, affordable transportation.

    The vehicles are typically used vehicles from Somerville's rental fleet or end-of-lease term vehicles. Vehicles offered must pass a 68-point inspection before qualifying for the inventory. They are then completely reconditioned and offered with a limited warranty. Depending on the application, budget and down payment of vehicles range from $59 to $89 per week. To help maintain a clean payment record, payment is expected weekly or bi-weekly. The province's leading bankruptcy trustees and credit counsellors have accepted Somerville's program and recommend clients with confidence.

    Perhaps what makes Somerville so unique is its complete focus on used vehicles. "We are working toward a cradle to grave process," says Bill Somerville. "We manufacture used cars. We buy the vehicle new from the manufacturer and, in some cases, put it into the rental fleet for a year and half. Then it moves to the leasing company to be leased for three or four years, and after that it moves to the specialized credit area." This process is used with a small percentage of vehicles that go the full circle from cradle to grave. Vehicles are also purchased and inserted into the circle at the specific point where they are needed.

    Thirty-eight percent of Somerville's leases are for used vehicles. Moore believes this number will increase as the cost of new vehicles continues to rise. "Because we are in the used vehicle business anyway with our rental company, we understand used vehicles. We buy them new and make them used. We extend this expertise to our customers." Moore points out the advantage of this process since the capital cost is roughly half of what a new car is, and Somerville's ROI is equal to if not greater.

    Somerville National Leasing & Rentals makes use of the typical remarketing processes to dispose of vehicles. In addition to releasing and sale, vehicles are taken to auctions both in Canada and the United States. Somerville's disposal program is considered one of the best in Canada. Moore holds up the company's ability to get enhanced value for each vehicle when it is remarketed at the end of the lease. "We have a disposal manager who really has an eye for detailing and reconditioning of the vehicle, and he knows where the market is," says Moore. "It's proven itself over and over again. A lot of the work we do in house gets us top dollar for the vehicle."

    In Canada, banks are restricted from leasing automobiles. Moore credits the Canadian Leasing Association and the automobile dealers groups which lobby very hard against the banks. "Our lobbyists are very strong and very successful," he says. "Their argument, quite simply, is that the banks which are our largest funders have all of our customer lists. By virtue of the security that they hold over our companies, they would have an undue advantage should they get into the vehicle leasing business." 

     So far it's worked. The Bank Act comes up for review every five years, and while banks have been hard to change the restriction, to date, the law does not allow their involvement with leasing. 

Service Coordinator John Lee (left) and Service Manager Mike Kamer make sure customers' vehicles are ready to go.

    Neither Somerville nor Moore want to predict whether this will always be the case. Moore says, "There are only eight chartered banks in Canada, so even if they do get into the leasing business, there would only be a few more players."

     Unlike most NVLA members who operate in one state or a small geographic region, Somerville National Leasing & Rentals is licensed in each province across Canada. Moore says that it's just a simple matter of getting a provincial sales tax licence and remitting the taxes to each jurisdiction in which the branch is located. Managing offices on both sides of the country is done easily via a centralized accounting system.

   "Our offices are purely sales offices," Moore says," and we make sure they are equipped to service the customer." Each one of the five branch offices has a sales team made up of a leasing sales manager who has full autonomy to run the office, salespeople, and two lease coordinators who do the paperwork, billing, etc. Most of Somerville's customers are on automatic debit from their bank account. All accounting processes are centralized.

    Doug Moore says that the company has not been seriously challenged by manufacturers' subvented lease programs. “There is no question they are here to the same degree as in the U.S., but we have not been challenged by the competition. We've always considered ourselves niche marketers, and many customers come to us because they have not been satisfied with their lease through the dealership.”

    Bill Somerville adds, “We're in the service business. We're also in the people business, and we like to think our people give better service than the competition.”

    Part of Somerville's growth has come from the acquisition of other leasing companies. One recently acquired portfolio was owned by a member of Doug Moore's study group. “The owner of the company made up his mind very quickly to dispose of his company.” It took only 10 days from the first call to the close of the deal. “We already knew each other from the study group and there was a high level of trust,” says Moore. Somerville not only acquired the portfolio, but the entire staff of the company as well.

    Two other acquisitions were family-owned leasing companies in Toronto whose original founders were contemporaries of Harold Somerville. Bill Somerville says, “We were able to negotiate very quickly and move right up to the top of the list because, in both cases, the vendors quickly realized we had the same values as their fathers. The deals were done in short order.”

Somerville is not content to rest on its laurels as one of the largest independent leasing companies in Canada. Plans for future growth include additional acquisitions and new locations in different cities. Moore says, “We've confidently got our ears to the ground for portfolios that may become available.”

    Harold Somerville's original dream when he moved to the city has come to fruition. Through hard work, innovative marketing and creative strategies, his son and the employees of Somerville National Leasing & Rentals Ltd. are positioned for future growth and continued success.