No more Chrysler or GM leasing?

[Masked Bandit]

http://www.financialpost.com/story.html?id=680397

I know this could have been in the automotive new section but I think this will apply to a large number of people on the board.

Who here has a vehicle leased right now? Maybe not through GM or Chrysler but I would think that most of the other manufactures will follow suit fairly soon.

[heavyD]

Interesting. I wonder if there will be a domino effect especially for companies that move alot of trucks and SUV's. INtersting also to see that Canadians love to lease but that probably explains the glut of BMW's in this city lol.

[Masked Bandit]

Originally posted by heavyD
Interesting. I wonder if there will be a domino effect especially for companies that move alot of trucks and SUV's. INtersting also to see that Canadians love to lease but that probably explains the glut of BMW's in this city lol.

I think the guys that usually move a lot of trucks are already hurting (maybe not too bad in Alberta though).

I think even if Ford is the only one to add to the list (I can't see how they wouldn't follow GM and Chrysler) it will create pressure on the remaining companies. The guys left in the game may increase their lease rates due to less competition?

Man, people are actually going to have to BUY AND PAY FOR their cars instead of just renting. Wow, what a concept!

[Redlyne_mr2]

Wow....they're in serious trouble.

[ShiDave]

They could also just quit making shitty vehicles that depreciate 95% after 4 years too. I'm sure Honda/ Toyota/ BMW won't have these problems.

[realazy]

The problem is just by the end of their leases, the vehicle is worth even less than the residual price. The way I see it as, if I don't plan to keep the vehicle after the lease term, why would I finance it? Unless the rates were really different.

If i finance it, I'll have to figure out a way to sell the car afterwards.

It all depends on the total cost after term is over. If in the end all you're paying for is the depreciation of the car and maybe a little more, why not lease?

Another thing to note is that by the end term, the warrenty is mostly over and repairs are going to cost you.

[boarderfatty]

I think you will find alot more companies going through rental agencies for fleet rentals instead of buying their vehicles once leasing is no longer an option.

[nbaker00]

WOW! This is really going to help there situation:rolleyes:

[Redlyne_mr2]

Originally posted by boarderfatty
I think you will find alot more companies going through rental agencies for fleet rentals instead of buying their vehicles once leasing is no longer an option.
Yep Jim Pattison is going to be rolling in the money now.

[MoDo27]

Its several things, mainly the 30 billion "out there" that needs to be moved by Friday (to another lender). Add in the sub prime/mortgage fiasco and the writing was on the wall.

Mainly, (what they have turned it into) is a long term money making plan. Its already been explained in this thread why leasing was killing the big 3, $100 a month for a fucking Caliber, then it comes back after lease and there is 8-10K LOSS directly to Chrysler/GM/Ford in between what the lease income was and what they sold it for.


Not a healthy way to run a business, and you don't see them too worried about it because leasing only makes up for 20% sales (Mopar) in the states, and around 50% in Canada (but they only look at Canada as a state..so..
:whocares:

Although you will still be able to lease, just not through GMAC (49% owned by Cerberus, or Chrysler financial that is owned by Cerberus LLC/Chrysler)

They will make financing attractive enough, don't worry.

[Mitsu3000gt]

Lots of American cars actually have a buy back from the dealer for a value more than the car is worth on the used market because they depreciate amazingly fast, so that is likely one reason why. Because of this, it would be silly in many cases to actually buy the car rather than lease it if you don't plan on keeping it forever.

I don't see how financing can get more attractive than it already is (They seem to do 0% or 0.9% deals all the time). Even with some of the slightly improved newer cars, you can buy it for half the price in a year or two so buying new remains very unattractive until they get their act together.

[Tik-Tok]

Wowzers!

I foresee a LOT more Ford/Toyota/Nissan trucks on the road, as small-business owners can't write financing off on their taxes, but can write off leasings.

[canuckcarguy]

Businesses can still lease, they'll just have to go through an outside finance company with realistic residual values.

I think this is a good step for Chrysler and GM, they got too focussed on how may vehicles they were moving instead of how profitable they were. The depreciation is mainly their own fault - they push the leases, therefore causing a glut of pre-owned vehicles.

Part of the problem is that they don't let the consumer negotiate a better price at the end of the term if there's been lots of depreciation. I leased a Ford truck through my company, and at the end of the term the buy out was about $27K, and the retail value was about $22K, which I'd have happily paid, since it was a great truck and I knew its history. But the dealer couldn't offer me a better price, so Ford took it back, where it likely ended up at the auction, and likely netted them closer to $18K.

[TYMSMNY]

Originally posted by Tik-Tok
Wowzers!

I foresee a LOT more Ford/Toyota/Nissan trucks on the road, as small-business owners can't write financing off on their taxes, but can write off leasings.

Sure they can, businesses can write off the depreciation of the vehicle.

[Nufy]

Originally posted by canuckcarguy

Part of the problem is that they don't let the consumer negotiate a better price at the end of the term if there's been lots of depreciation. I leased a Ford truck through my company, and at the end of the term the buy out was about $27K, and the retail value was about $22K, which I'd have happily paid, since it was a great truck and I knew its history. But the dealer couldn't offer me a better price, so Ford took it back, where it likely ended up at the auction, and likely netted them closer to $18K.

I wonder if you could follow it through the process and get it at auction for 18K.

[bspot]

Originally posted by Mitsu3000gt
Lots of American cars actually have a buy back from the dealer for a value more than the car is worth on the used market because they depreciate amazingly fast, so that is likely one reason why. Because of this, it would be silly in many cases to actually buy the car rather than lease it if you don't plan on keeping it forever.

I don't see how financing can get more attractive than it already is (They seem to do 0% or 0.9% deals all the time). Even with some of the slightly improved newer cars, you can buy it for half the price in a year or two so buying new remains very unattractive until they get their act together.

Exactly why I leased when I drove domestics. You were completely covered from depreciation, and the residuals were almost always set too high, which meant your payments were smaller than they should have been.

[ShiDave]

Originally posted by Tik-Tok
Wowzers!

I foresee a LOT more Ford/Toyota/Nissan trucks on the road, as small-business owners can't write financing off on their taxes, but can write off leasings.

You can write off financing. It just comes in the form of loan interest, vehicle depreciation, and mileage.

[bobby_lu]

Originally posted by Nufy


I wonder if you could follow it through the process and get it at auction for 18K.

Yes, if you are a dealer and can go to their auctions :)

[canuckcarguy]

Originally posted by Nufy


I wonder if you could follow it through the process and get it at auction for 18K.

I asked, but they said the vehicle was first offered to the dealership for the residual price (they were turning it down), then offered to surrounding dealerships for that price (they'd likely turn it down due to the high price), and then it would go to a Ford dealer only auction. Occasionally, they'd send some through to a general dealer auction, but they'd never run it to a public auction. I guess I could have tried to have the Ford Dealer purchase it at auction on my behalf, but they were lukewarm to the idea - all they wanted to do was sell me a new one, but I wasn't interested.

[businessman777]

Original Post Removed. (Please read the Forum Rules and Terms of Use (http://forums.beyond.ca/articles.php?action=data&item=1) before posting again, or risk getting banned).

[ACX]

BMW has had hundreds of millions of dollars in write downs this year because of this and are looking at cheap financing now as an alternative.

Toyota last week echoed the same sentiments. Regardless of who you are this leasing thing is going to change since the industry is changing.

not that facts have any place here.

[blownz]

Originally posted by boarderfatty
I think you will find alot more companies going through rental agencies for fleet rentals instead of buying their vehicles once leasing is no longer an option.


Originally posted by Redlyne_mr2

Yep Jim Pattison is going to be rolling in the money now.


Actually he won't. I don't know specifically where Jim Pattison borrows money to maintain his fleet, but Cerberus (so Chrysler Financial and GMAC) just increased finance rates to rental and leasing companies to over 20% so they won't be much competition. And other banks have also pretty much locked up money for rental and leasing companies because it is considered very high risk right now and next to impossible for them to raise the needed capital to lend to them.

The next half year or so should be very interesting.

[blownz]

An interesting article in yesterdays Edmonton Journal about this topic:



GM puts leasing on a shorter leash

It seemed a little confusing.

It certainly was dramatic. Was General Motors actually thinking of getting out of leasing? Or was it simply backing away from the lease subsidization that has been such a large part of The General's success? Was this one more in a long line of straws that would break the proverbial camel's back?

The real reason most of us were left confused by GM Canada's announcement was the total shock. Leasing commands a much larger portion of automotive sales north of the 49th parallel than it does in the United States. We Canadians, with less disposable income than our American compatriots but no less inclined to drive beyond our budgets, lease a much higher percentage of vehicles with as many as 45 per cent of new vehicles leased.

So, for the record, GM Canada is not getting out of the leasing business. It will simply stop subsidizing its leasing deals. Nonetheless, that GM would futz with one of its main sales tools seemed shocking. But not illogical.

The problems for General Motors are manifold. For one, as has been widely reported, the company is facing a possible shortage of cash. Though America's largest automaker has not yet run out of greenbacks, some analysts are predicting that exact eventuality within the next 24 months.

What has really exacerbated that problem is how dramatically the floor has dropped out of the truck and large SUV markets. And while it's immediately obvious how this might affect the selling price of a new vehicle in the showroom, its effect on resale values (and, therefore, on lease residuals) is even more dramatic.

According to industry analyst Dennis DesRosiers, "Residual value losses on four-year-old large pickups are currently 17.7 per cent of their original manufacturer's suggested retail price and with large SUVs the residual losses are in the 10 per cent of the original MSRP range."

Simply put, the residual values of all those trucks and sport-utes coming off lease have dropped steeply below what GM anticipated. Its leasing arm, once General Motors' money-lending cash cow, lost $2.5 billion US in the second quarter of this year.

GM may also have had no choice in its decisions. It only owns 49 per cent of its financing arm. GMAC's majority stakeholder is Cerberus Capital Management, the private equity firm that recently bought Chrysler. Chrysler, too, is facing financial strain, so Cerberus is probably not feeling too happy about subventing money-losing leases. One has to wonder if Cerberus would have preferred to get GMAC completely out of the leasing business.

Indeed, in the United States, General Motors took pains to announce that it's business as usual, for the time being. In an e-mail obtained by the Associated Press, GM told dealers it will continue to offer leasing incentives, at least through August.

"Obviously, current financial pressures will continue to affect our perspective on leasing," says Mark LaNeve, GM's North American sales chief. "That said, while we obviously can't make guarantees, we are in the market today with competitive programs to make GMAC leasing more affordable and plan on continuing to offer this financing alternative as part of our August incentive play on '08 and '09 models (with some adjustments and exceptions)." An industry insider suggests that those exceptions will be the volatile truck and SUV segments.


Interesting that more Canadians lease compared to Americans.

[legendboy]

I find it funny that people would choose to finance one of these vehicles.

Your basically throwing 75% or more of your money down the drain over the course of your financing term.

[Hakkola]

GM Puts Leasing...
The problems for General Motors are manifold.

:rofl:

DANGER TO MANIFOLD!

[Masked Bandit]

So leases are back on eh? I wonder who got their ass kicked for making the original decision and then having to reverse it?

[ShiDave]

Originally posted by Hakkola


:rofl:

DANGER TO MANIFOLD!

:rofl:

[blownz]

Originally posted by Masked Bandit
So leases are back on eh? I wonder who got their ass kicked for making the original decision and then having to reverse it?

I am pretty sure GM never got completely out of it. They just stopped subsidizing leases. So now a lease will be at maybe 8% while financing is 0-1% so basically people will be forced into financing.


Another problem for manufactures leasing (and also smaller companies like Jim Pattison) is that when leasing the company providing the lease is ultimately liable for the vehicle since they own it and someone else is basically just renting it from you. You may have to prove you have insurance on the vehicle before it leaves a dealership but nothing is stopping you from cancelling it the next day. So leasing companies have to have Lessors Contingent Liability Policy to cover their ass in case something happens. And things have been happening more and more lately and that type of insurance policy has become very expensive.

[Masked Bandit]

Originally posted by blownz



Another problem for manufactures leasing (and also smaller companies like Jim Pattison) is that when leasing the company providing the lease is ultimately liable for the vehicle since they own it and someone else is basically just renting it from you. You may have to prove you have insurance on the vehicle before it leaves a dealership but nothing is stopping you from cancelling it the next day. So leasing companies have to have Lessors Contingent Liability Policy to cover their ass in case something happens. And things have been happening more and more lately and that type of insurance policy has become very expensive.

Yes and no. I don't know anything about the Contingent Liability so I'll assume you are right (and it makes sense from an insurance angle) but when we write the policy on a leased vehicle, the leasing company (GMAC, Chrysler Credit, whoever) gets listed on the policy. If the policy is cancelled (by the client or company) the leasing company gets a copy right away. Oddly enough the big guys never seem to move all that fast on this information (repo the car) but the little guys like Jim Pattison or VFC jump right away.

[blownz]

True but regardless how fast the company acts there is still a chance of something happening so there is the need for insurance plus it is something that is typically needed by the leasing company to show its finacing company that its money is insured to a degree.

[Redlyne_mr2]

Originally posted by blownz
True but regardless how fast the company acts there is still a chance of something happening so there is the need for insurance plus it is something that is typically needed by the leasing company to show its finacing company that its money is insured to a degree.
Agreed, it's not a perfect system... much more risk with a lease. Many manufacturers are still very successful with leasing, it's these high residuals that create loses.