Heavy Truck Sales
The Company leased 1,154 commercial vehicles in the third quarter of 2012, compared to 3,126 in the third quarter of 2011, and 816 commercial vehicles in the fourth quarter of 2012, compared to 1,804 in the fourth quarter of 2011. The decrease in commercial vehicle sales and servicing and leasing was primarily due to a general slowdown in the economy that led to unfavorable investment sentiment for purchasers of commercial vehicles. Additionally, the Company adopted a stricter leasing policy, which caused it to repossess more vehicles for late payment and reject a higher number of new applicants.
Since launching its commercial vehicle sales and leasing business in March 2008, the Company has leased over 37,000 trucks, as of December 31, 2012. The Company repossessed 789 vehicles whose lessees had defaulted on installment payments, sold 611 of these vehicles, and recorded 18 vehicles as total losses during the year ended December 31, 2012. There were 160 vehicles repossessed, 118 vehicles sold and 15 loss vehicles recorded in the year ended December 31, 2011. Additionally in 2012, the Company adopted a stricter leasing policy, which caused it to repossess more vehicles for late payment and reject a higher number of new applicants.
Used Vehicle Leasing
Under the Company's used commercial vehicle sale-leaseback program, 824 used trucks were leased in the year ended December 31, 2012.
Insurance Agency Services
The Company launched its own insurance agency business in December 2011 and has signed agreements with four major insurance companies in China to sell insurance: China United Property Insurance Company Limited, Sinosafe General Insurance Co. Ltd. (Hua An Insurance), Ping An Insurance (Group) Company of China, Ltd., and China Life Property and Casualty Insurance Company Limited. AutoChina's 534 store locations are each licensed to sell insurance from these carrier partners, and, as of December 31, 2012, the Company also operated 23 new insurance agency branch offices in appropriate markets that are solely dedicated to this service.
Expansion of Specialty Finance Store Network
During the 2012 third quarter, AutoChina opened nine new commercial vehicle financing and service centers and 11 during the 2012 fourth quarter. As of December 31, 2012, the Company operated 534 financing and service centers, compared to 506 centers at December 31, 2011. The Company operates commercial vehicle financing and service centers in the Anhui, Beijing, Chongqing, Fujian, Gansu, Guangdong, Guangxi, Guizhou, Hebei, Henan, Hubei, Hunan, Inner Mongolia, Jiangsu, Jiangxi, Jilin, Liaoning, Ningxia, Shaanxi, Shandong, Shanghai, Shanxi, Sichuan, Tianjin, Yunnan, and Zhejiang areas of China.
During the second half of 2012, AutoChina closed on a transaction to purchase 23 floors of newly constructed office space in the Kai Yuan Center building, which was built by the Company's Chairman and CEO Mr. Li and is the tallest building in Shijiazhuang at 245 meters in height. The new office space was purchased for approximately $56.4 million, and the Company also assumed approximately $102.9 million in debt as part of the acquisition, resulting in a total transaction value of approximately $159.3 million.
Construction of the Kai Yuan Center has been completed, and, in April 2013, AutoChina moved its headquarters into the new building, which now serves as the control center for each of the Company's 534 commercial vehicle financing and service centers located throughout China. The Company does not anticipate that it will occupy the entire office space purchased, and expects to lease out the unoccupied space, the proceeds from which will be reported as rental income.
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