Credit crunch killing car lease deals
Troubles in the U.S. credit markets may have an impact on how you buy your next car or truck.
Leases subsidized by manufacturers — those deals that make a lot of luxury vehicles affordable on a monthly payment basis for many consumers — may become highly restricted.
Chrysler Financial has announced it is pulling out of the lease financing business. GMAC Financial Services — the largest auto financing company in the United States — and Ford Motor Credit Co. have said that they will be less involved in pushing subsidized leases.
GMAC has said it would no longer offer incentive-based leases in Canada, but didn’t outline specific plans for the United States.
There are two factors at work here: The rising cost of borrowing for these lending giants and the collapsing values for a lot of vehicles coming off lease.
It’s not uncommon now for lenders to lose money on leased vehicles. That’s because these vehicles sell wholesale for a lot less than the residual value that was negotiated when the leases were financed three or more years ago.
The drawback on lease values could put automakers in a bind because they have traditionally used low-payment subsidized leasing as a way to clear inventory.
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