Chrysler Gets a Jolt of Lease Traffic
By JEFF BENNETT and STEPHEN WISNEFSKI
August 1, 2008
A week ago Chrysler LLC announced its financial arm would stop offering leases on new cars and trucks, effective Friday. For some dealers, the move has sparked a boomlet.
“It has been a frenzy,” said Paul Steel, who runs three dealerships in Michigan, including Southfield Chrysler Jeep outside Detroit. “Everyone is trying to get in now on a three-year lease hoping that Chrysler Financial will get back in the game by the time their lease is done.” Mr. Steel has kept his dealerships open until midnight every night since Monday, and he expects his staff will be working until at least 2 a.m. Friday to process all the orders.
Golling Chrysler Jeep Dodge Inc., in Bloomfield Hills, Mich., more than tripled its business, selling 112 vehicles Monday and 96 Tuesday, said owner Bill Golling. The majority of sales were through leasing.
Down the road, the scaling back or elimination of leasing makes their job tougher at a time when U.S. auto sales already are at their lowest level in 15 years.
Without leases to lure customers, the Big Three auto makers could see more people defect to foreign auto makers such as Toyota Motor Corp. and Honda Motor Co. Leasing has been a favored method in Detroit of getting customers into more expensive cars and trucks than they could afford to buy themselves, as well as having people buy new vehicles every two or three years.
But it is a risky business because auto makers’ financing arms have to take back vehicles after leases expire, and then sell them to recoup some of their costs. Because high gas prices have depressed demand for used trucks and sport-utility vehicles, they are losing a lot on the trucks and SUVs they leased in the past few years.
GMAC LLC, which is partly owned by General Motors Corp., lost $717 million in its auto business in the second quarter as a result of bad leases. Since Chrysler said it was getting out of auto leasing, both Ford Motor Co. and GM have scaled back their leasing businesses, as have a few banks.
The end-of-month surge in sales prompted by Chrysler’s move should boost the auto maker’s sales for July, which will be reported Friday. Through the first six months, Chrysler’s U.S. sales were down 22%, the biggest drop of any major car manufacturer, as the company relies more than its peers on sales of trucks and SUVs. It also is helping dealers reduce their inventory of 2008 vehicles.
“I have got to get rid of this inventory and move out the 2008s and then we can figure out something for August sales,” Mr. Steel said. He has to sell about 500 vehicles alone at the Southfield location before he can start accepting Chrysler’s 2009 models, he said.
The jump in sales also may indicate that some people are buying sooner than they otherwise would have, suggesting sales in coming months could suffer. For auto dealers struggling with bloated inventories of trucks and SUVs, however, their first priority is moving the 2008 models off the lot before new models hit the showroom floor and before the current batch lose even more value.
Seriously, CU’s are doing great right now as people flock to them because their big banks are doing he knee jerk reaction to the credit crisis and refusing to offer good loans to even qualfied borrowers.