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  • Chrysler no longer leasing

    I read today that Chrysler was no longer going to offer any leases.

    Does anyone have any thoghts on what this might mean?

    It makes me think they might not be planning to still be around
    when these vehicles come back in off lease.

    Also, GM claims they have several bidders for Hummer.
    They want 15 billion for it.

    I think Hummer might have done better if it would have been part
    of GMC, Chevrolet, Cadillac, etc rather than trying to be a stand alone brand of its own.

    Any thoughts?

  • #2
    I heard on the news yesterday that Ford was losing $90M/day during the last quarter... not a good time to be involved in the auto manufacturing business! [B)]

    <h5>Mark
    '57 Transtar Deluxe
    Vancouver Island

    Are you planning to attend the NW Overdrive Tour in Parksville, BC
    May 23 & 24, 2009?
    </h5>
    Mark Hayden
    '66 Commander
    Zone Coordinator
    Pacific Can-Am Zone

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    • #3
      Leasing has been turned into an attempt to defy gravity in an effort to move metal by most manufacturers, and I applaud Chrysler for sticking it's neck out and trying to correct the market. The manufacturer or lease company predicts what the car will be worth when the lease is over as the residual value. Manufacturers have been propping up residual values to offer these factory subsidized $199/mo leases, thus exposing themselves to huge losses when the cars are turned in and sold for actual market value. Taking this step proves to me Chrysler is alive and thinking. This move will reduce their volume but improve their profit per vehicle. You will still be able to lease a Chrysler, but through an independent leasing company.

      There are currently two forces converging on HUMMER.

      GM's HUMMER move is part of a reaction to the decision by Congress last year to push through an increase in the Corporate Average Fuel Economy (CAFE) limits to 35 mpg. Ford, Chrysler, and GM have never paid a fine due to CAFE even at the current 27 mpg level, and they will change their product lines in the future to avoid any fines. HUMMER will best fit in with a premium luxury brand that can absorb the fines into their price and not affect the market positioning of the trucks. Some companies who have had to pay CAFE fines in the past are Rolls Royce, Mercedes-Benz, and BMW. Expect prices on large vehicles to move into that arena.

      If the HUMVEE is replaced as the primary military vehicle in the future, HUMMER will also lose some of it's glitter. The HUMVEE, like the Jeep, will not go away immediately, but the HUMMER doesn't have the same market following that the Jeep has enjoyed for 60 years. I think the government is accepting designs for the next generation all purpose vehicle right now, and a proposal from Navistar International is creating some "buzz". General Motors has nothing to do with the government contract, that's AM General's business, but if a new vehicle is chosen by the military, it will affect the appeal of the civilian HUMMER.

      Kevin Wolford
      Plymouth, IN

      55 Champion
      60 Lark VI Conv.
      63 Avanti R1

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      • #4
        Another thought. I guess as a group we have a good historical insight on what happens when an automaker decides to make leasing it's PRIMARY business (i.e. Studebaker-Worthington).

        Kevin Wolford
        Plymouth, IN

        55 Champion
        60 Lark VI Conv.
        63 Avanti R1

        Comment


        • #5
          quote:Originally posted by 556063

          You will still be able to lease a Chrysler, but through an independent leasing company.
          Correct. The financial arm of Chrysler will no longer provide leasing. This is NOT meant to be that Chrysler will STOP leasing vehicles all together as the newspaper headlines state. You can still lease but thru an independant carrier, HOWEVER, your credit rating will have to be higher than when Chrysler was providing the lease contract.


          Frank Remlinger
          SDC# A004602R
          Frank Remlinger
          Detroit, Michigan
          SDC# A004602R

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          • #6
            Chrysler also stated that they would attempt to create finance programs that would be comparable to their lease programs. Here in NJ leasing has been a solid 40-50% of sales for years now. Three dealerships I've managed over the past 8 years have all maintained that average. Yet, when the super duper finance programs hit, especially 0%, the business shifts dramatically to financing. With interest rates as low as they are now low rate or even 0% is less expensive than some cash rebate programs, which are almost never combined with the low rate incentives.

            What is really driving this move, IMHO, is the future cost of re-selling the lease returns. On GMAC's auction site for dealers, I bought a low mileage Trailblazer that had an original list of over $32K for $9600. I have to pay close to that for a 2005 Saturn ION that had an original list of 16K. GM is losing about $8k on the Trailblazer based on the residual originally used on the lease. The ION is bringing them a $3k profit. If you are Chrysler in this day you would be foolish to use subvented leases on your Durangos, Pick-ups, 300's etc. to move them. The question they're faced with is 3 years from now will those cars be marketable at inflated residual values needed to bring the lease payments down? Who knows? But probably not and the manufacturers can no longer gamble on the market because they don't have the chips.

            Lease rates have gone up and residuals down on some of our more popular models and I think it's a sign that Chrysler isn't the only one thinking about the lease market. Every week in my sales meeting I tell my salespeople to stop relying on leases to make the deal and get used to offering the finance alternative.

            It will be a painful transition for dealers and customers. Customers that want to drive higher end vehicles will now actually have money. The used car market will see fewer late model, low mileage inventory but the market may actually improve because if you have to drive a Lexus you will have to buy a used one becasue you can't lease one for $399 per month anymore. Manufacturers like Honda, whose cars have amazing resale value, will move their lease payments up with the marketplace, even though their cars may bring them even money back at the end of the lease, because they don't have to be anything but competitive. Why be $75 per month less when $20 might get the deal?

            I'm glad I'm getting near the end of my career and not the beginning.

            ErnieR



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            • #7
              In the Automotive News article discussing the Chrysler decision, it was noted even Honda had to report a loss from leasing operations last quarter. Even manufacturers with stellar resale value are reporting leasing losses. The deals really were too good to be true, and anyone trying to buy a lease out at the end of the term should have seen that as the buyout was almost always way beyond market value. The true business case for leasing was abused, and just as with the sub prime mortgage market, things must now take place to correct the problem.

              Kevin Wolford
              Plymouth, IN

              55 Champion
              60 Lark VI Conv.
              63 Avanti R1

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              • #8
                As usual Kevin and Ernie, excellent posts- well-spoken and dead-on! Your forum handles are among those that, when I see them, make me go to those threads first to see what you've said.

                I grew up in the car business; bought my first car at auction at 14. So at 47 I've been watching the business for a long time. After all this time there are still many things I just cannot understand- what my market is going to want from one week to the next, what a given vehicle will draw on a given day at auction, and how leasing deals in recent years aren't buying trouble for the company in the long-term! When I looked at the end buyouts on some of these, some were more than retail! I just figured I was ignorant of how it worked, and the company/dealer back-end loaded the deals purposely to keep the lessee from buying it at the end for a reason I didn't understand. Thank you for showing me that my logical thinking was correct, and that the tactic was in fact artificially moving units, and ignoring a big problem at lease end...

                Given what you've said, it's clear that cutting out the leasing is the right plan for the long-term; but like most instances comes at the cost of short-term pain. I work with several small, independent new car dealers of different makes, and I wonder how many have been holding on by the thread of unrealistic leasing ability; and if Chrysler has any ideas in place to help dealers make up for some of that loss. Any ideas on that?

                What Kevin said about Hummer makes sense as well- I could never understand the appeal or market for those in any market outside of Schwarzenegger and a few rappers... and there's only so many of those... another thing I don't understand about the business.

                Thanks again guys for your insight. I'd like to get the chance to meet you, and further pick your brains about the industry someday



                Robert (Bob) Andrews Owner- Studebakeracres- on the IoMT (Island of Misfit Toys!)
                Parish, central NY 13131

                "Some people live for the rules, I live for exceptions"- 311

                "With your Lark you're on your own, free as a bird, alive as a Lark. You've suddenly discovered that happiness is a thing called Larking!"



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                • #9
                  Chrysler has announced it will refocus monies it was throwing at leasing toward retail programs. Expect more programs like 0% for 72 months. It makes much more sense business wise, because the cost is a known cost at the front of the deal on a discounted loan rate, and the company retains no long term risk by betting on the value of the car a few years ahead.

                  The $2.99 gas price guarantee has not generated the floor traffic Chrysler expected. It was quite an ingenous gimmick, but if you sit down and do the math, it din't even come close to offering the value that a discounted loan or subsidized lease offers. That program ran out of "gas" quickly, and could even become worthless to customers who bit on it if gas prices continue to fall in the months ahead.

                  When we bought our 2007 minivan in November of 2006, my former boss tried to push us hard into a lease. The payment was half of what a straight out purchase payment was. I've never been a fan of leasing. I don't like the mileage restrictions, and in the case of the van, I knew I would rather be driving a 2007 van in 2010 than a 2010 van. The leasing program at the time even guranteed an interest rate on the buyout at the end of the term, but if you did the math on that, you'd still end up paying thousands more to own the van over a longer period. If your goal is to own the van outright, there's no less expensive way to own it than to buy it. These lease programs were a great way to drive something new every 36 months, but that's not my style, and I put more than 15,000 miles on a vehicle per year.

                  Chrysler has the advantage of being a privately held company and they can do things that make sense like discontinue leasing and not have to worry about Wall Street and analysts having a cow over what it will do to their cashflow, etc. That's one advantage they have over GM and Ford right now. I don't expect GM and Ford to follow Chrysler in this move. I do expect GM and Ford to begin pricing their leases at a more realistic level, however.

                  Chrysler must soon correct it's absolutely pathetic product offerings. It's biggest competitive disadvantage is it's product line. It's small car offerings aren't even selling in this market. In this respect, Ford and GM are light years ahead of Chrysler right now.

                  Something to consider is that when Chrysler was separated from Daimler, if it would have been done via the equity markets, Chrysler stock would have been worthless. It's great to tout the advantages of being private, but that is why Chrysler is a privately held firm today.

                  Kevin Wolford
                  Plymouth, IN

                  55 Champion
                  60 Lark VI Conv.
                  63 Avanti R1

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                  • #10
                    Ford Canada has just announced it is ending leasing incentives.

                    Terry Godkin
                    Surrey, British Columbia

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                    • #11
                      quote:Originally posted by fstst56


                      Also, GM claims they have several bidders for Hummer.
                      They want 15 billion for it.

                      Well, Ford and another, still anonymous, bidder wanted to purchase the HUMMER brand name from AM General in 1999. Ford even had their HUMMER already designed and ready to tool up when AM General gave GM the nod. Of course 3 months later FORD announced it was buying LAND ROVER from BMW ...to counter GM's HUMMER purchase[?]

                      I think Hummer might have done better if it would have been part of GMC, Chevrolet, Cadillac, etc rather than trying to be a stand alone brand of its own.

                      How so??? GM, knowing there is/was a market for the HUMMER brand name, ideally pre-positioned HUMMER, with a stand-alone dealership network, to sell off should they decide to. It comes as no surprise to hear GM has bidders lined up to purchase HUMMER. And ...it wouldn't come as too big a surprise if AM GENERAL wasn't one of them, considering they have made more profit in the past 3 years than North America operations of the GM, FORD & CHRYSLER ...combined![:0]

                      <h4>The older I get ...the better I was! </h4>

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                      • #12
                        Dealer Leasing Programs, regardless of the brand have been a way that Dealerships could put individuals into cars that 1)they could not other wise afford 2) sell high end, high profit vehicles, and 3) get a return on them when returned at the end of the lease. I have, since the beginning, been opposed to these lease plans. Most of the vehicles on lease are high end luxury vehicles including large trucks. Well we all know what has happened to that portion of the vehicle market. As Ernie pointed out the bottom has fallen out of it and now you can purchase the vehicles for peanuts. Chrysler's survival as an auto manufacturer depends on drastic measures such as this and I give them great kudos for having the guts to make this move. Hopefully it will right a sinking ship for US auto manufacturers and all will survive what looks like a very uncertain future at the moment.
                        sigpicSee you in the future as I write about our past

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                        • #13
                          Leasing changed a lot of things in the car business. If it does get less attractive to lease we might see brand loyalty make a comeback. Message to all manufacturers...either extend warranties to at least a 4 year 50,000 mile duration or build one hell of a car. Consumers are a lot more forgiving when the manufacturer is paying for the repair.

                          So many of my lease customers lease so they never drive out of warranty. They have fixed their costs of transportation with the only variables being the cost of normal maintenance and maybe front brakes and a couple of tires. Ownership has very little appeal to them.

                          We in the business will need creativity in marketing the product and not just the payment, salespeople must know the competition because real value will need to be established in their product. Every aspect of the dealership must be focused on keeping the customer. You have more chance of losing them in 5 years than you do in 3 and they don't have to see you when their finance contract is up.

                          On the positive side nice used cars will bring a premium and the manufacturers may again enjoy selling fleet to large companies because the impact on the residual values when the fleet cars hit the market for resale won't be a big deal. Service departments may become real profit centers again because the consumer that owns their car may do the proper maintenance to protect their investment and the creative dealer should make it easy and comfortable for them to do that.

                          Hopefully, there will some creative financing programs. Balloon financing with conservative residuals might make a bit of a comeback. GM already offers its lease customers who are eligible to get out early a $2,000 incentive for financing rather than leasing again. No doubt that will be available to more lessees coming out and probably a bigger number than $2,000. Banks may get into the new car finance business more aggressively for their best customers.

                          Pity the consumer that has bad credit at least for awhile. My sources are getting tighter, and fussier. They are choosing not to lend money on certain types of vehicles and if you are "upside down" in your trade chances are you will be driving it until it's paid for.

                          Fortunately, I can weather the storm or just get out altogether but I feel for salespeople right now. There will be a lot of attrition in the next few months. Profit margins that are already low may drop lower in an effort to keep the payment palatable.

                          ErnieR

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                          • #14
                            I bet the high-end guys, Mercedes, Lexus, Infinity, Acura, Saab, Volvo, Jaguar, Land Rover...keep their lease departments.

                            63 Avanti R1 2788
                            1914 Stutz Bearcat
                            (George Barris replica)

                            Washington State
                            63 Avanti R1 2788
                            1914 Stutz Bearcat
                            (George Barris replica)

                            Washington State

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                            • #15
                              Ernie

                              Just as you have noted the market is going to change again just as drastically as it did when leasing first became an option. This time it is back to equity ownership and hopefully some longivity in owwnership of a vehicle. Having to explain to a claimant why the yresidual value is less than their lease or the total owed on the car has not been a pleasant experience over these last few years. Will it improve in time it will but not in the short run. I know many who are in the business will figure out creative ways to lure customers to show rooms and make the sale without a leasing option. At the same time there will be good premium slightly used vehicles available in the market place at a significant profit level for dealers. So in the long run, as it has been before there will be a shake out of under capitalized dealers and other consolidations of brands and the fittest will survive and we will all be happy.

                              See you in Lancaster? I hope so since it is so close to you.

                              See you in the future as I write about our past
                              sigpicSee you in the future as I write about our past

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