Quote:
Originally Posted by Buickman
in this market, the majority of consumers lease, some dealers retail well in excess of 50% through leasing. these clients will not switch to long term financing. their loyalty to GM is greatly diminshed due to plant closures and wage/benefit reductions. the market will turn to manufacturers with supported, or normally strong, residuals and to pre-owned units. dealers dependent upon new vehicle deliveries had better re-strategize quickly, focusing on used, adding non-domestic franchises, streamlining operations, and building profitable back end business.
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Leasing is market based more than anything though. Canada for example is going down the drain faster than any others. Back when leases were signed, we were under the assumption of 60 cents CDN vs 1 dollar USD. The steep rise of the Canadian economy and the resale value on trucks and SUV seem to have all hit at the same time. Making all leases basically worthless and a huge loss. US on the other hand isn't nearly as bad with leases since it doesn't have the same factors to worry about, though still has poor resale.
Canada leases accounts for just over 40% of all vehicles and the US is around 20%. From what I understand of my colleagues in LAAM is that the market is vastly different there. In the middle east for example, more than 95% of the vehicles are bought in cash. Many of these vehicles are used by the government for work and combat purposes. The general public there does NOT buy US made vehicles. Asia has a completely different financing agreement than that we have here in North America, GM will not kill leasing in Asia or Latin America for simple reasons, the markets there are vastly different and the economies aren't at all like they are here in North America. Resale values on the vehicles in those markets have barely changed. The only place you may notice a blip on resale value are chinese vehicles, but it isn't changing sale patterns all that much for GM.
What GM is trying to do with North America is attempt to plan the future. At this point it is very difficult to attempt to dictate where the market will be in 2-3 years from now. Will resale of cars tank? Will resale of trucks skyrocket back to the top? All what ifs, but none that will dictate a clear path as to what they should actually do. At this point taking any leases is a huge gamble. What GM is doing rather is making financing more attractive while leaving leases on some vehicles. Most people who get a Corvette would lease, now you can get 0% financing on a Corvette. This is in attempt to change buying habits and in the end it isn't all too different. It will help resale values to which the customer should have no problems with. Ask any customer and the reason they take lease over financing is because of lower monthly payments and not simply because it is a lease. There is a very small percentage of people who take leases because they want something new every few years, but you can still do it even if you finance.