Between the credit crunch and the downturn in the U.S. auto market, auto leases have been left out in the cold. Companies such as Chrysler Financial have already exited the leasing business, with several other banks following suit. Although not completely out of the leasing business, GMAC – the U.S.’ largest auto lessor as of mid-year – is following down a similar path, with leases now accounting for just a tiny part of the company’s business.
During the month of September, leasing accounted for less than two percent of General Motors’ new car business. During the same month last year, GM leased about 16.8 percent of all new vehicles.
Leases have traditionally been a low cost way for customers to get behind the wheel of a new car, but several factors have forced lending companies to shift away from the leasing business. One of the biggest factors is the dropping residual values for most vehicles, particularly large trucks and SUVs. Vehicles are simply not worth what they once were coming off lease, making it next to impossible for companies to turn a profit on leased vehicles.
From a consumer prospective, the credit crunch is actually driving up the cost of a lease, making traditional financing more attractive. Automakers typically subsidize leases – making them less expensive for the buyer — but few banks are buying the notes on leased vehicles. The results are lease prices $70 to $90 higher per month than would have been seen just a year ago.
But GMAC – which is now 51 percent owned by Cerberus and 49 percent owned by GM – isn’t quite giving up on the leasing business yet. Although leases will probably remain under two percent for the foreseeable future, GMAC is leaving the door open for a full-fledged return to leasing sometime in the future. “At such a point as leasing makes sense, you will see a return to leasing,” GMAC spokesman Mike Stoller told Automotive News.
Overall, industry-wide leases slipped to 12.3 percent in September, down from 18 percent a year earlier.
