GM to get out of the lease game in Canada

[fredi91]

We just got word that GM is going to get out of the lease game by setting all rates to 'core' beginning August 1st.

Is this happening south of the border as well??

http://www.canada.com/windsorstar/ne...html?id=680397

[PAULSTS1]

I am feeling like the old Sage, just this morning I was responding to a tread on "Dealership Treatment of Customers by Salespersons" and one of the issues I mentioned was the Credit Crisis. I further extrapolated, that the market would change, borrowers would have to be much better qualified with high FICO, and more money down would be required. As I was typing, I thought about leases (the majority of USA) obtain more expensive cars this way. I was with a Major Lender that a few years ago acquired a large portfolio of leases, and discovered a whole lot of problems, that caused losses on lease returns. With tighter lending practices I believe most lenders will no longer offer leases soon, meaning that buyer will have to qualify with income, instead of making deals with just Credit.

The option of closing the availablity or a reduction in the lease offers, will definitely change how car borrowers will obtain vehicles, how much they must pay for them, and ultimately how long they will keep him. Many borrowers will not qualify for some of cars, they are now driving! Fun cars such as the Challenger, Camaro, and Mustang, will instead of being traded every 24-36 months may be in the hands of the initial owner for 60 months or so. That prospect of a Dealer not being able to sell based on Monthly payment may cause borrowers to shop, with more emphasis on utility instead of style.

Makes me glad I am not in Rick Wagoner's Chair!

This is another issue for GM, when sales are not as expected...more red ink?

[Buickman]

since I personally do 80% of my business as leases, I hope it's not true but I have it from good sources...no more GMAC leases. you'll hear about it Monday.

[goblue]

I can't see why GM would not find a way to continue leasing. It puts a new car in a customer's hands every few years, while only requiring the borrower to finance the portion used rather than the entire car.

Let alone GM, what is this going to do to Audi or BMW! A much higher percentage of luxury cars are leased than standard vehicles.

[44 mpg by 2010]

Isn't it reasonable to believe that "rapidly declining residual value" (resale value) will ultimately start to "drag down" MSRP to reflect the new level of "technology value"?

[Buick61]

GM, Chrysler to stop leasing vehicles

Nicolas Van Praet, Financial Post
Friday, July 25, 2008

The financial arms of Chrysler LLC and General Motors Corp. are getting out of the business of leasing vehicles as credit tightens and resale prices for gas-quaffing trucks fall, according to company executives and independent sources.

The move, effective Aug. 1, could spark a backlash among dealers and consumers. In Canada, an estimated 43% of drivers lease their vehicles, double the U.S. rate of 20%

GM dealers in Canada were to be told about the change affecting its GMAC financing unit on Friday. GM's U.S. dealers are also expected to be affected. A GMAC spokesman would not confirm the change, saying there is no public announcement at this time.

GMAC is majority owned by New York private equity company Cerberus Capital Management. Cerberus also controls Chrysler.

"The removal of the need to finance leases simplifies the financing challenges faced by Cerberus," said Paul Taylor, chief economist with the U.S. National Automobile Dealers Association. "But it removes an important option for many consumers."

Geoff Helby, an analyst with J.D. Power & Associates in Toronto, said Toyota Motor Corp. and other automakers that offer attractive lease rates and decent residual values could win more business from the Detroit automakers as a result of the move. "It would definitely put Chrysler and GM at a serious disadvantage."

"We can get deals for people that are very comparable if not better [than leasing]," said David Paterson, vice-president of corporate affairs for GM Canada, adding that GM buyers are increasingly choosing financing over leasing. Financing now represents 60% to 70% of GM Canada sales, he said.

[LeSabre]

I think this is a very stupid move for Chrysler.
I have not read anywhere else about GM doing this anywhere.

"It would definitely put Chrysler(and GM) at a serious disadvantage."

No doubt!

For Chrysler, I think this appears to be a sign of its possible.....inevitable demise.

.

[throwback]

Dealers will have to go through banks for leasing rates. I can understand why Chrysler is getting out of leasing, it is costing them too much money. What's the point of selling cars via a lease, if you are losing money on every lease? I bought my HHR with 0% percent financing. Did GM make any money on my deal? The dealer did but I'm not so sure about GM.

[spaz]

where i live 85% of people acquiring new vehicles lease, so either the dealers will have to find banks to lease the cars or individual leasing companies will pick up whatever the dealer lose. That or people just wont get the GM vehicles

[PA Dweller]

Why does Chrysler need to do this? What happen to all this financial backing they were getting from their new owners?

[Sinner]

Originally Posted by throwback

Dealers will have to go through banks for leasing rates.

That's fine and dandy down in the US, up here banks aren't allowed to offer leases. If people think the numbers are bad for May/June, just wait for the the next 1/4's numbers, a lot of people can only afford to lease.

[Buick61]

Originally Posted by PA Dweller

Why does Chrysler need to do this? What happen to all this financial backing they were getting from their new owners?

Yeah, except that Businessweek is reporting that even the banks are getting out of the Leasing Business:

Wells Fargo Bank (WFC) said that, starting at the end of July, it will no longer buy auto leases from carmakers. And investors are sharing the pain, too. Last month, Standard & Poor's (MHP) put nine asset-backed securities packed with auto leases on credit watch for a possible downgrade. Investors holding that paper have already taken a hit.

Link

[PAULSTS1]

Originally Posted by spaz

where i live 85% of people acquiring new vehicles lease, so either the dealers will have to find banks to lease the cars or individual leasing companies will pick up whatever the dealer lose. That or people just wont get the GM vehicles

Sunday Morning Salutations Spaz:

I have bad news for you, the banks are soon to follow Cerebus lead. I have been associated with the 2nd Largest bank in the USA, and years ago they acquired a large portfolio of leases from a failed bank. The acquisition was full of issues, most of the values of the vehicles coming back off lease were too low, making them paper losses. Our resale department, very cleverly re-wrote many of the leases and replaced the profit back in it. However with the ongoing (and don't be fooled, it is far worse than you think) Credit Crisis, most banks will eliminate: Student Loans, Sub-prime Real Estate loans, Leasing for domestic vehicles, and Lower Credit Card Approvals (based on higher FICO scores). The reason is the investment capital worldwide (about 70 trillion dollars) has completely dried up, it's just not there! If you doubt it try to get a personal loan, at any rate!

My advice to all who will listen: Get out of Debt as fast as you can! You may have to pay on your house, but few need as much Credit Card purchases, and replacement of vehicles; continuing the financing "trap." This problem will be revealed to be World wide very soon.

[Bvonscott]

Great. So you can lease a import but not a domestic. Watch GM sales slide even more. STUPID STUPID STUPID.

[RamJet502]

Weird, doesn't make any sense to me.