GM Lease Pricing May Become More Competitive; Buick/GMC Get New Program First

Automotive News

January 9, 2015

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General Motors plans to make GM Financial its preferred lender for subsidized leases, a big step toward elevating its in-house lending arm into a full-line captive finance provider to enhance GM dealers’ ability to sell vehicles.

Starting Feb. 3 with Buick and GMC, GM will offer lease subsidies, known as subvented leases, through only GM Financial, according to a letter that the automaker sent today to Buick-GMC dealers and obtained by Automotive News. GM now offers subvented leases through other lenders as well, primarily Ally Financial and U.S. Bank.

GM plans to move Cadillac to lease subsidies exclusively through GM Financial sometime in March, a separate letter to Cadillac dealers said. Chevrolet also is expected to make the switch, three people familiar with GM’s plans said, although the timing is unclear.

Both letters said the move is intended to drive customer loyalty. “We believe our strategy to leverage [GM Financial] will enable us to deliver significant benefits to you, your customers, and GM,” they said.

GM is moving to address a competitive weakness that has hindered the automaker since its separation from former captive-finance arm GMAC, which later became Ally. Keeping the vast majority of its leases in-house will give GM more control of its customer data and a better shot at keeping its off-lease customers.

GM dealers “remain at a material disadvantage with the likes of Ford, Toyota and VW” because of GM’s lack of a strong captive-finance arm, Morgan Stanley analyst Adam Jonas said in a research note last year. He estimated that GM’s lack of a “mature” captive finance company costs GM about 2 percentage points of U.S. market share. GM’s market share in 2014 was 17.8 percent, easing from 17.9 percent in 2013.

GM spokesman Tom Henderson confirmed that the company informed dealers that GM Financial “will be the exclusive lessor for Buick-GMC,” starting in February. He said GM is “targeting” March to include Cadillac in the program, but declined to comment on Chevrolet’s involvement.

“This is consistent with our strategy to provide our customers with competitive, transparent financing products,” Henderson said. He said the move will “help our dealers maintain strong lease loyalty” by offering simplified, more-consistent leasing programs.