Off Lease Only, a used vehicle-only dealership group with operations in Florida and Texas, filed Thursday for Chapter 11 bankruptcy protection.
In a news release, the company said "significant challenges and competitive pressures resulting from unprecedented changes" to the automotive retail landscape during the last few years necessitated a wind-down of its operations.
Before the filing, Off Lease Only listed five dealership locations in Florida and one sibling dealership, CarSquad, in Katy, Texas. The company terminated all 545 employees "immediately prior" to Thursday, according to a court filing. The websites of Off Lease Only and CarSquad displayed "closed to the public" notices Thursday.
"The industry has been impacted by inventory scarcity, and vehicle price inflation stemming from supply chain disruptions and multi-year declines in new vehicle production," the company said in the news release. "Elevated pricing and rising interest rates have further deteriorated conditions in the automotive retail market, weakening consumer demand and affordability."
The case was filed in U.S. Bankruptcy Court for the District of Delaware.
In a court filing containing his declaration of support for Chapter 11 proceedings, Off Lease Only CEO Leland Wilson said the company experienced a “significant decline” in revenue starting in 2022 due to macroeconomic factors impacting the used-vehicle market.
Off Lease Only’s business model – which centered on used vehicles less than 4 years old and with fewer than 40,000 miles – lost viability as supply chain disruptions of the last few years reduced availability of new vehicles and prompted dealers to compete for limited used-vehicle inventory, which drove up wholesale prices, according to Wilson’s declaration.
The company’s declining performance through 2022 and 2023 and the presence of inventory that had been on its floorplan for more than 120 days prompted Ally, its floorplan provider, to seek modifications to that agreement, according to Wilson’s declaration. In February, its floorplan line of credit was reduced to $180 million from $200 million.
Off Lease Only received liquidity injections from other lenders, but its profits and liquidity position continued to deteriorate as the used-vehicle market softened, according to the filing. It considered a sale or merger and engaged BofA Securities as an investment banker in June, the filing said. No transactions were completed.
In August, Ally suspended Off Lease Only’s ability to request floorplan financing for vehicle auction purchases, according to Wilson’s declaration.
“With no viable going concern transaction, limited ability to purchase inventory, and a constrained liquidity profile, as a result of Ally’s actions, the Company determined that its only option was to cease operations, allow Ally to collect the vehicles securing the Floorplan Line, and wind down its businesses in chapter 11,” Wilson’s declaration said. “The Company stopped selling vehicles on September 6, 2023.”
Colo Real Estate Holdings — a Delaware limited liability company of which Off Lease Only is a parent — also filed a voluntary petition for relief under Chapter 11, according to filings. So did Off Lease Only's parent company, Off Lease Only Parent.
All three entities filed a motion requesting that the Chapter 11 cases be consolidated.
The bankruptcy filing comes as dealers and retailers continue to grapple with a softer and more supply-constrained used-vehicle market that has contributed to other closures this year.
Subprime auto lender American Car Center shuttered its operations in February amid more Americans falling behind on their vehicle payments. U.S. Auto Sales, a used-vehicle dealership chain in the Southeast, closed all 39 of its locations and furloughed its employees without pay in April.
Shift Technologies Inc., an online used-vehicle retailer, indicated last month it is in need of more capital as it reviews strategic alternatives for the business. In June, public dealership group Sonic Automotive Inc. cited lower used-vehicle availability and higher wholesale pricing as its reasons for suspending operations at eight of its EchoPark used-only locations and an unspecified number of delivery/buy centers.