Chrysler getting out of the leasing business.
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Chrysler getting out of the leasing business.
While dealers will certainly be able to find secondary sources to lease their vehicles, dropping residual values on many trucks and SUVs will certainly make getting a lease more expensive in the years to come. Considering that Chrysler is owned by Cerberus who also owns 51% of GMAC, reveals that things aren't going so well in the financing side of the auto business either.
http://money.cnn.com/2008/07/25/auto...ion=2008072515
http://www.bloomberg.com/apps/news?p...ehg&refer=home
http://money.cnn.com/2008/07/25/auto...ion=2008072515
DETROIT (AP) -- Chrysler LLC has told dealers that the automaker's financial arm plans to get out of the auto leasing business before the end of the year.
A dealer who asked not to be identified says the reason is that the company has experienced losses on leased sport utility vehicles and pickup trucks because their residual values have dropped.
Chrysler spokesman Stuart Schorr declined to comment on the issue but said Chrysler executives will hold a conference call Friday afternoon.
Word of Chrysler Financial's move comes a day after Ford Motor Co.'s (F, Fortune 500) credit arm took a $2.1 billion charge because of the drop in the residual value of leased vehicles.
The Chrysler dealer did not want to be identified because the company had not made an official announcement.
A dealer who asked not to be identified says the reason is that the company has experienced losses on leased sport utility vehicles and pickup trucks because their residual values have dropped.
Chrysler spokesman Stuart Schorr declined to comment on the issue but said Chrysler executives will hold a conference call Friday afternoon.
Word of Chrysler Financial's move comes a day after Ford Motor Co.'s (F, Fortune 500) credit arm took a $2.1 billion charge because of the drop in the residual value of leased vehicles.
The Chrysler dealer did not want to be identified because the company had not made an official announcement.
``This just shows how severe the deterioration in residual value is,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``To pull back completely on leases means they think prices are going to go down probably through next year.''
That decline eroded the advantages for Chrysler Financial in making the leases, Press said.
``The pressures on leasing are going to follow everybody,'' Press said. ``There are a lot of financial requirements for leasing to not make it as attractive as it had been.''
Leases account for about 20 percent of the vehicles driven off dealer lots, according to Auburn Hills, Michigan-based Chrysler, which is operated independently of Chrysler Financial within holding company Chrysler Holding LLC.
``It profoundly hurts me,'' said Alan Helfman, owner of
Helfman River Oaks Chrysler Jeep. ``I was doing 20 to 30 leases a month.''
That decline eroded the advantages for Chrysler Financial in making the leases, Press said.
``The pressures on leasing are going to follow everybody,'' Press said. ``There are a lot of financial requirements for leasing to not make it as attractive as it had been.''
Leases account for about 20 percent of the vehicles driven off dealer lots, according to Auburn Hills, Michigan-based Chrysler, which is operated independently of Chrysler Financial within holding company Chrysler Holding LLC.
``It profoundly hurts me,'' said Alan Helfman, owner of
Helfman River Oaks Chrysler Jeep. ``I was doing 20 to 30 leases a month.''
Last edited by johnsocal; Jul 25, 2008 at 04:20 PM.
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Joined: Mar 2001
Posts: 3,376
From: Sarasota FL
To wit: CFC is offering $7k in lease incentives right now on a Grand Cherokee. One my best salesperson bought had an MSRP of $32,500, well equipped. So he gets $7k off, and a virtually 0% money factor to meet his $410 per month 36 month lease payment. That makes his residual value about $20k.
Based on today's dollars, his car will be worth $14k at best in 3 years...the bottom line is that Chrysler is tired of trying to predict the market. At the same time, it sends the wrong message about the products. Chrysler's residuals are pretty much the same as Ford and GM...but you don't see them pulling out....
Yet...
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Joined: Aug 2001
Posts: 2,400
From: Michigan's left coast
The estimates I read in Wards suggested that declining residual values on leases would cost bank and financing companies somewhere in the neighborhood of $5B/year over the next three years!
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