PaulChristenson

Chrysler to get out of leasing business

By TOM KRISHER
AP
DETROIT -Chrysler LLC said Friday its financial arm will get out of the auto leasing business by the end of the month because economic conditions have made leasing more expensive than buying, for both consumers and the company.
The move comes as Chrysler Financial is in the process of renewing a $30 billion credit line with banks amid a startling drop in values for leased trucks and sport utility vehicles that are coming back to automakers as leases end.(Gee, do you think they will cut prices to move these vehicles???...)
Chrysler Vice Chairman and President Jim Press said the company wants to allocate limited resources to retail incentives and financing, which make up 80 percent of the market, instead of leasing, which is 20 percent of the U.S. market.
Because banks lend money based on the risk, and the risk of leases sold as securities has increased, interest rates to borrow money for leases are higher than those for retail sales, said Tom Gilman, executive vice chairman of Chrysler Financial.
"They basically premium price for the risk, and the cost of that borrowing has increased dramatically," he said.
Press said the dramatic drop in truck and SUV values at the end of their leases also played a role in the company's decision.
"We really reached a point today in this environment where the advantages of leasing, the economic advantages of leasing, have really disappeared," Press said during a conference call Friday afternoon with reporters and industry analysts.
Chrysler said it will sweeten incentives on the retail side to make up for any lost lease business. The company on Friday announced that it will expand zero percent financing for 72 months on vehicles from Ram pickup trucks to the Jeep Grand Cherokee and Commander and other SUVs. The offers will run through the end of the month.
Chrysler's announcement comes a day after Ford Motor Co.'s credit arm took a $2.1 billion charge because of the drop in the residual value of leased vehicles, mainly trucks and sport utility vehicles.
Press said Chrysler would also have to take a similar write down, but "it hasn't been a major problem for us at this point in time."
Chrysler, which is 80.1 percent owned by Cerberus Capital Management LP, is a private company and unlike Ford, does not have to report such write-downs.

Paul in VT

I used to own an ant farm but had to give it up. I couldn't find tractors small enough to fit it.
-- Steven Wright

PaulChristenson

Auto Leasing Gets Tougher, Costlier


By Chris Woodyard,
USA Today
Posted: 2008-07-30 11:03:03
Leasing a new vehicle could get more expensive - if you can get a lease at all.




Automakers' financial arms are cutting back leasing programs. Falling used vehicle values, especially for big pickups and SUVs, have caused losses on current leases. Also, the overall credit squeeze is making it harder for the companies to borrow to finance new ones.

Coping with lease problems:

--Chrysler. The company's financial unit will suspend offering any new leases on Friday. Dealers who want to offer leases will have to line up their own financing deals.

About 20% of new Chryslers, Dodges and Jeeps are leased, and hard-pressed dealers are unhappy.

"It's not going to help," says Adam Lee, president of a group that includes two Chrysler dealerships in Maine. He says he's working to line up an alternative financing source for leases.

--Ford Motor. Lease rates will rise on big vehicles as Ford Credit revises down its estimates for their value at the end of the lease. In second-quarter earnings posted last week, Ford wrote down more than $2 billion on leases made by its financial unit, because of falling resale values.

--General Motors. GMAC, the financial services firm co-owned by GM and Cerberus Capital, says it has been weeding out riskier credit customers in the past year. On Friday, it'll stop offering discounted leases to GM's Canadian customers but has no immediate plan to extend the ban to the USA.

--Nissan. CEO Carlos Ghosn told Reuters this month that the automaker had been surprised by the reserves it needed to set aside to cover potential losses from its leasing due to overly optimistic estimates of used car prices.

"Panic is setting in because of the huge decline in the values of trucks and SUVs," says Jonathan Banks of Automotive Lease Guide, one of the services that estimates depreciation of the value of new vehicles - the so-called residual value at lease-end that is used to figure what the lease payments need to be.

As a result, Banks says, "It's going to be harder to lease a car."

Some consumers who leased big SUVs before gas prices shot up are trying to dump them through online services. One New York SUV lessee is offering $4,000 on Swapalease.com to anyone who'll will assume the $665-a-month lease through April 2010, on a 2007 GMC Yukon XL. There're a lot of drivers "who want to get out of their leases," Swapalease President Richard Joseph says.

Current lessees aren't affected by the cuts - and could benefit. Unwilling to offer new leases, but wanting to keep the customers, Chrysler will waive the $300 lease-end fee if a customer buys that vehicle and add a $750 cash incentive if he or she buys a new one.

Paul in VT

I used to own an ant farm but had to give it up. I couldn't find tractors small enough to fit it.
-- Steven Wright

Deanster

How long before Chrysler gets out of the car business altogether?

___________________________
Cub Cadet Yanmar EX3200, CL300 Loader w/ Rankin toothbar, Land Pride bucket forks, CB75 Backhoe w/ mechanical thumb, Woods LR72 Landscape Rake, Rankin RC20-72 rotary cutter.

gunmaker

My local Chrysler dealer just packed it in...from now on he's only selling BMW's.

JD 2520 w/46bh, 200cx loader, meyers 6ft plow
jd 425 w/54"mmm& 54"plow

Ducati996

why would it be just Chrysler? it could be all of them, first by CH 11 and then a sell off of assets. Thats a real screwy and scary scenerio, and damn shame to have this happen.

Kubota L39 w/WR long RGB Grapple, Bradco Pallet forks, BH QA buckets, and more!
JD 2520, 210Cx, 46BH, 60" Box Blade-Mid West, 52" Mid West aerator, 52" first choice Tiller, 5' Fontier blade, 42" pallet forks, Green MFG PHD, Mid West York Rake w/guage wheels, Cub 3204 with Blower & Simms Cab, Mowers (44",48",50"),Ford 2006 F550 turbo diesel 4x4 w/11' mason dump, 16' 10k Doolittle trailer, Southwestern enclosed trailer, Wright Stander RH 52", Better Outdoor Product Quick 32" mower!

tomwilli

Chryler doing it here in Canada also. Telling dealers that you can still lease but find your own financing for it.

GM Canada is getting rid of leasing.

Supposedly because of the drop in used car pricing and financing costs related to lease ends.

There was a lot of talk not long ago about the leasing business here is Canada and how the leases were sold out to finance companies who then insured against possible losses.

Became a real issue when the auto manufacturers had to reduce Cdn prices to something more resembling U.S prices and it kicked the heck out of used car prices.
Leases ends came up, buy back was more than the value of the used car. Customers just wanted to turn them back in and lease again.
Finance companies couldn't get the dealers to buy them back at lease end price.
Finance companies then went back to the Insurance companies who had to end up carrying the loss.

Bunch of unhappy corporate people.

So, easier for them to end leasing. Only problem was for the people who were on a current lease and would have simply turned car back in at lease end and now they can't.

Know someone caught up in it but GM offered to finance a new car for them instead of a lease at fairly good terms and at the end the will own it.

Will be a big kick though for Corporate customers who will now have to buy all their cars instead of leasing them.

Interesting times ahead I think with forecasts of a series of interest rate hikes because of inflation which is primarily the result of inflated oil prices.

Bit of a conundrum

Have a great evening.

Tom

PaulChristenson

Because Chrysler is a privately held company, Cerberus Capital Management LP...very difficult to raise MORE capital...

Paul in VT

I used to own an ant farm but had to give it up. I couldn't find tractors small enough to fit it.
-- Steven Wright

Mark / Ohio

The interest rate hike part of it would be a silver lining among a dark cloud for me.


We are down to $3.64 / gal. here now so the cloud is not quite as dark as it was.

Mark

2002 John Deere LT150

Deanster

Chrysler already went tits-up once before. They were bailed out by...

___________________________
Cub Cadet Yanmar EX3200, CL300 Loader w/ Rankin toothbar, Land Pride bucket forks, CB75 Backhoe w/ mechanical thumb, Woods LR72 Landscape Rake, Rankin RC20-72 rotary cutter.

LarryRB

Chrysler was not bailed out by the govt as you and many others say. Chrysler was given a loan guarantee back up by the gvt in case they faulted on the loans. Ioccaca paid off the loans 3 yrs ahead of schedule and not once asked the govt for back up.. It is the identical set up as VA loans which are guaranteed to a certain figure, Also against many who think Mercedes did them a favor, they did not,, I can't think names right now,, there is one guy, 53% of the stock, who sent each and every share holder a personal letter not to listen to Waggoneer and vote to allow mercedes to take it over, At the time Chrysler and it's dealers were doing the best they ever did. By the first month of Mercedes taking them over, they were paper backrupt and it only went down hill from there, Funny that they would can Waggoneer and he was taken over by GM, who under his watch is the worse they have ever been, this is before high gas prices and slipping sales.

"this morning I woke up with nothing to do, it is now afternoon and I have over half of it done".
Digging in hard clay is more relaxing to a worm than going fishing..