Chrysler just announced that they are going to kill leasing through Chrysler financial and GMAC just annouced they are going to end it in Canada. Before you say well thats just Canada, they lease more than the US on a percentage basis. So my question is is leasing as we know it done? No one is pricing residuals correctly and if they did for larger cars, trucks and SUVs the prices would be uncompetitive.
GMAC to Halt Auto Leasing in Canada
Funding Challenges
Cited for the Move;
Following Chrysler
By JOHN D. STOLL July 29, 2008; Page B2
GMAC LLC has informed dealers that it will suspend subsidized leasing of automobiles in Canada as of Aug. 1 as the conditions for financing these types of loans has tightened.
GMAC, the biggest auto lender in North America in terms of volume, follows Chrysler LLC’s Chrysler Financial arm, which informed its dealers of a similar decision concerning U.S. leasing Friday. GMAC, like Chrysler Financial, is controlled by Cerberus Capital Management. General Motors Corp. holds a minority stake in GMAC, relying on the lending arm to finance a majority of the new cars and trucks it sells.
Subsidized leasing encompasses virtually all leasing arrangements on automobiles. An auto lender typically offers a lower monthly payment over the period of the lease, and the cumulative price of the lease to a consumer is typically substantially less than what the vehicle could be financed for in the case of a purchase.
GMAC’s move in Canada could be a prelude to a similar one in the U.S. if the leasing market continues to deteriorate. Last week, Ford Motor Co. took a $2 billion charge for the second quarter related to bad leases. GMAC hasn’t reported second-quarter earnings.
“We informed [dealers] as of today that as of August 1st, we’re suspending incentivized leasing in Canada,” spokeswoman Gina Proia said Monday evening.
She said GMAC faces “funding challenges” for lease assets in Canada. GMAC, like other auto makers, utilizes leases as essentially a two- or three-plus-year rent on a vehicle, after which time the buyer returns the vehicle to the dealer and the financing company sells the car.
In Canada, about twice as many buyers lease new vehicles as a percentage of the total market as do in the U.S. Estimates peg the penetration of leasing to be about 40% of all new-car purchases. GMAC’s decision could lock GM out of at least some of that market in the future.
Ms. Proia said GMAC hasn’t announced a similar move for the U.S. as of Monday. She declined to comment on whether the move will negatively affect GM sales in Canada.
I know that I saved probably around 15k leasing my TBSS over the hit I’d have taken if I’d bought it…GMAC is going to take it instead when I turn it in.
If it’s worth 21k in Jan 2011, which is my residual, I’ll eat my spare tire.
I heard about the GMAC Canada thing on the radio this morning.
You’ll still see leasing, but maybe only for makes that hold their value. GM is getting screwed because they leased so many full sized trucks/SUVs that are now worth nothing on the used market.
Honda on the other hand is probably making out like bandits on the Civic leases that were signed 3 years ago and are just coming due.
Do you live in Canada and looking at a GM or looking at a Chrylser in the US?
If the answer is No to both of those you are ok for now. Prices are just a lot higher on GM leases right now. Might be worth looking at the lower rates on certified used cars. 48 months at 2.9% on a used car value might be the same as a lease term.
correct me if I’m wrong, but with leasing, you put up this huge down payment / deposit, pay less each month than if you were to buy it, have a restricted amount of miles to use, and are required to give it back at the end of the term. If there is any damage to the car, or you went over on miles, you pay pretty good at that time.
If I’m buying, I can put little to no money down, pay a bit more each month, but I can use the car for whatever. I could drive a million miles with no penalty. get a couple scratches or a couple dings? no big deal. pay off my loan early, and either drive it till it dies with no car payment, or resell and start over again.
i’ve definately thought about leasing, but it hasnt made sense to me before. Of course, up untill this year, I was driving 25-35k/year. now I’m at about 12-14.
Not always. In my case, sticker was $41k. I could have gotten it for about 33-35 if I purchased. I put nothing down, leased for 39 months @ $330 a month. Total cost at the end of the lease is $12k and change. If I had purchased, I would have had to come up with a down payment, my payments would be in the high $500’s- low $600’s, and I’d still be upside down right now. The mileage thing, if you don’t buy more miles up front then yeah it hurts you, but so does trying to sell a car used with a ton of them. It’s basically a hedge against depreciation because you have all your costs laid out in front of you from the start and don’t have to deal with selling a used car or trade-in lowballs.
GMAC is considering ending subsidized leases on General Motors Corp cars and trucks in the U.S. market, a step similar to the pullback the finance company has announced for Canada, according to an executive with a U.S. dealership briefed on the plan.
you don’t recall the big huff about Gm selling a huge chunk of GMAC? You know, one of the most profitable things GM had going for a long time (at the time)…