CU Xpress Lease Inc. is on a record-setting pace in auto leasingactivity with 2010 up 100% on year-over-year numbers from 2009.

“Last year was a pretty good year for us,” said David Jacobson,president/CEO of GrooveCar Inc., which formed CU Xpress Lease Inc.with Fusion Auto Finance LLC in 2007.

“During the model year change-over, when the manufacturers startto come out with new products, they do not come out with programson new cars. Now the dust is settling, and they're all easing off.We went from 250 last year to 600 this year,” he added, referringto 2009 and 2010. “We actually got 1,500 applications. We gotanother 500 that are not funded yet. There will probably be atleast 1,000 leases funded for October.”

“We are usually stronger and weaker based on what themanufacturers and banks are offering. We find the areas that arebeing ignored by the factories or banks,” said Jacobson. “We findthe car Honda does not have a special on. We find the niche. Theremay be two Hondas we can compete on out of the 12 models. But thatwill give five, six or seven cars that we can make a deal on. Andthat's just in each individual dealership and Honda alone.

“We are always finding the niche,” he added. “We've been doingthis for years.”

Jacobson noted that because the banks came back strong, 2010 wasa challenging year at first, but GrooveCar has come back onpace.

“It's hard to put your finger on why, except that we arediligently looking for deals to give out credit unions,” Jacobsonsaid.

Those 1,000 leases funded last October, totaling about $30million, are a jump from the 350 leases funded in October 2009.

“I think leasing is building steam,” Jacobson said. “Peopleweren't looking for leasing [in 2009]. The manufacturers wereputting big rebates on cars. Leasing was dead. When you saw ads onTV, you didn't see any ads for leasing. It was all aboutbuying.”

In 2010, leasing came back, he added. “The general public isback into leasing. Leasing is surging right now because themarketing is there. There is a buzz around leasing. We are actuallyriding some of that wave. The manufacturers cannot support everycar; that's where we are. We do not have to give the rate away. Wecan compete in the area where there is less competition. It's acritical piece to credit union lending right now.”

Jacobson expects this trend to continue for about four to fiveyears.

“As the cycle goes, you will see this for about four to fiveyears,” he said. “Other than the captives, there are very fewleasing companies for smaller banks doing leasing. That provides atremendous opportunity for credit unions doing leasing. Leasing isat the beginning stages. There is such little competition outsidethe captives. There is business that can be had.”

“When there is no competition, there is no need for inflatedresidual values,” he said. “If there's no one there to compete withyou, you don't have to raise the residuals, and you will have thatfor a while.”

CU Xpress Lease Senior Vice President Frank Rinaudo said thatleasing is up in general.

“In addition, we are witnessing an upsurge in leasing activityas volume increases from credit unions already in our program, aswell as new entrants.”

Jacobson agreed. “It's really a combination,” he said. “Ourcredit unions are doing very well. We also expanded. We are workingwith signing up some credit unions in California. The business weare talking about right now is really existing credit unions. Andright now, we have an internal marketing campaign reaching out tocredit unions. We are also hearing from credit unions that arehearing a buzz. Credit unions want to become full-service lendinginstitutions.”

GrooveCar's average FICA score is 760 for leasing, and it isexperiencing two repossessions out of 1,000 deals.

“The delinquencies are incredibly low,” Jacobson said. “Creditunions that want to lend money-this is a way to become afull-service lender. This is extra business. They need to lendmoney. It's a great lending product. We partnered with Fusion, andthey are remarketing experts. We have an exceptional remarketingprogram. This program is totally different. The credit union onlytakes the credit risk. They're made whole at the end of the lease.Fusion collects and deals with the remarketing. We've removed thecredit union from having to do any of that.”

“The beautiful thing is that we can go into any market and havegrowth within 30 days. We can also manage the growth by limitingthe cars we have leasing on. We can limit the amount of cars we cando specials on.”

At present, CU Xpress Lease is working with six credit unions,and most of the leasing is done by two or three of them, Jacobsonsaid.

“One credit union on the West Coast can give us 400 leases amonth,” Jacobson said. “There is a lot of volume out there forcredit unions looking for this kind of business.”

With the growth of credit unions in indirect auto financing, andthe big drop in leasing by captives, 2009 was CU Xpress Lease'sbest year for connecting auto dealers with credit unions. Targetingcredit union members, CU Xpress Lease has encouraged participatingcredit unions to increase their market share, and it said it isvery price-competitive on a wider range of autos-including Acura,Chevrolet, Dodge, Ford, Honda, Hyundai, Infiniti, Jeep, Lexus,Mazda, Mini Cooper, Mitsubishi, Nissan, Toyota and Land Rover-thanever before.

This has been helped by the opening of a joint retail centerlast June in Hauppauge, N.Y. The 50,000-square-foot return andretail center accommodates up to 300 vehicles and gives creditunion members local proximity to turn in their cars coming offlease and a place to buy used vehicles.