To all U.S. Dealers:
The announcement last week that Chrysler was discontinuing all leasing in the United States was big news and widely covered. You may also be aware that Chrysler had previously announced the discontinuation of incentivized leasing in Canada. Yesterday, GMAC in Canada announced it will exit incentivized leasing on August 1. Further, it is worth noting Ford Motor Company and Honda Motor Company recently announced they were taking an impairment against their lease portfolios. Suffice it to say, numerous factors are driving up the risks and costs of leasing and therefore, it is coming under increased scrutiny across the industry.
All of this has prompted numerous inquiries from our dealers regarding GM vehicle lease business in the United States.
Obviously, current financial pressures will continue to affect our perspective on leasing. That said, while we obviously can't make guarantees, we are in the market today with competitive programs to make GMAC leasing more affordable and plan on continuing to offer this financing alternative as part of our August incentive play on '08 and '09 models (with some adjustments and exceptions).
Over the last few years and months, lease vehicles have become a smaller percentage of our sales, and we do see this trend continuing due to the relative high cost and risk compared to traditional cash or APR business. This is why we offer a balanced menu of cash incentives, APR and leasing programs to make GMAC financing an affordable alternative on almost every product in our lineup.
Rest assured we will make every effort to stay aggressive in this hypercompetitive market.
Thanks for your support.
Mark LaNeve
Vice President
Vehicle Sales, Service and Marketing
Honda Canada, huh? I’d heard that they were having some financial trouble, mostly due to ineffective management, but I’d be very surprised to learn that Honda is exiting the lease business on the scale the GM proposes.
Ending incentivized leasing on turkeys like the Ridgeline and Pilot, sure, but to end it on the Civic (or any Acura) would be madness.
Dealers,
‘I realize these times are very confusing and daunting so I wanted to set the record straight. Leasing is an important part of our business and will definitely remain so, maybe. All options are on the table and everything can change without a moments warning. Hope this clears things up, good luck!’
What is the purpose of sending such a letter? It offers no new information and makes no promises? I would interperet this to mean, “leasing is already over”.
“Suffice it to say,”
Did this guy go out and burn a fatty during EN101!?
Why is it tough to envision the import manufacturers having a hard time?
The Ridgeline is not a truck and not a car.
Cheerleader pics – to offset the sad spin?
Why is it tough to envision the import manufacturers having a hard time?
It’s tough to imagine that Honda Canada, which sells three of the top-selling cars in the country (CRV, Civic, Fit) and several others that sell fairly well (CSX, Accord), and sells them at a profit, would be in the same kind of crunch as GM.
It’s a little bit disingenuous for Mr. La Neve to place Honda’s effort (which is a cost-control option for a few ill-selling models) on par with GM’s (which is the result of the bleeding gut wound that is their lack of available credit).
Read between the lines: GM is ready to kill leasing in the US on a moment’s notice. GM is marketing new incentives desgined to make dealers and customers avoid leasing as an option.
Whether Honda gets out of the lease business will not necessarily be dependent on its immediate financial situation but the makeup of its lease portfolio. If it is heavy on Odyssey, Pilot, Ridgeline and even CR-V they may decide to cut and run as all of these vehciles are losing resale value these days.
As for Acura, it is a luxury make and every luxury make is concerned about their lease exposure right now.
Yikes not a good cheerleading picture. For some reason the guy gives me the creeps like the childern eatting ‘Pale Man’ in Pan’s Labyrinth. Great movie, scary guy.
Although this doesn’t look good for the future of GM leasing in the U.S., in the “The Truth About Leasing” Editorial, Ken Elias states that “It comes as no surprise that GMAC and Chrysler Financial no longer offer leases in North America”, which would seem to be partially untrue at this point because it doesn’t look like GMAC has totally canceled their leasing program in the U.S.
Boy, do I wish I’d nursed my 99 SAAB a few more months before selling and leasing an Acura MDX. I cry as I pass the local car dealers now, with all the “sale” and “8K off !” stickers.
I’ll be giving the truck back at the end of the lease, three years hence….unless you make it worth my while…..
hint, hint, hint.
cheerleaders and cheesecake are needed !!!
The issue in Canada is the appreciation of the Loonie (Canadian dollar). But over the last few years, the loonie has appreciated by nearly 30% vs. the greenback.
Meaning that the prices of new cars should have fallen a similar amount. (Not completely as carmakers have been slow to drop prices when they are so unprofitable to start with).
So the prices of used cars have fallen along with new car pricing, meaning that leases signed a few years ago are WAY underwater.
That is a creepy picture, can’t say for sure why I think that.
I feel in Honda’s case, a reduced presence in leases (subsidized) wouldn’t hurt them terribly because of the (typically) higher residuals and health of the company make them a good bet for banks to lease Honda vehicles. A bank would probably have a lower rate, lower payment on a Honda Accord vs. a Sebring! Gonna guess the Accord has a slightly higher projected residual…
We’ve checked with GM dealers, and no one has the plan for August. As soon as we get one, we’ll let you know (obviously).
Meanwhile, just in case you thought that LaNeve’s comments meant anything, here’s an official “explanation” from Automotive News:
GM spokesman Pete Ternes said the automaker is deciding whether the [leasing] adjustments and exceptions will be similar to the changes in finance options GM typically makes each month, or something more significant.
“It’s a part of the business,” Ternes said. “We are always analyzing our markets and what we need to do to help sales.”
Ternes said he didn’t know whether GM would change terms for pickup and SUV financing.
“We know that the cost of incentivizing is getting higher, so that may come into play,” he said.
Wooohoo, I was looking at a new Silverado yesterday. Bring on the bigger rebates!
He sure said “incentivized” and “incentive” a lot.
The poor bloody dealers! Espcially in Canada where 40% of vehicles are leased, heavily skewed to the more expensive vehilcles. These dealers have huge overhead & inventory and are about to take a shot in both knees with the loss of leasing. First off, it kills their fleet business. Bang-dead!
It also kills Cadillac, Saab and the over $40k truck market. Nobody -literally -is going to take on the risk, unpleasantness and upfront 12% tax hit of financing a Cadillac CTS/STS or Saab 9.3/9.5 for 7 years in order to acheive the same 36mo lease payment they can get across the street on a 330i, E350, G35, C300 etc. Same goes for the Tahoe/Yukon/Escalade and all of Chrysler’s products. Ditto Ford, if they are out.
I expect Toyota Canada to come to market with daily 1.9% lease ads in print, radio and TV, based on reduced residuals. They can do anything they want since they have more liquidity than most countries!
In the U.S. leasing makes life simpler for small businesses. Figuring depreciation on buildings, equipment, furniture, computers, and vehicles is a night mare under the IRS rules. So many businesses like to lease anything they can because the lease expense is much simpler to enter when filling out their taxes.
Of course small businesses also like to lease because they often don’t have the money to buy things and they aren’t sure their business is going to survive.
Small businesses owners love leasing luxury vehicles because they can lease them through their company leaving a really low residual value, let the company deduct the lease and then buy the car personally at the lease’s end.
If GM does kill off leasing in the US (which I thought they did) it would kill Suburban (probably already dead), Corvette, and all Cadillac sales.
Chrysler doesn’t really have any luxury vehicles that fit this bill after killing off the Viper. The challenger is too new and shiny to suffer because of this, but if the funk doesn’t clear up soon, Chrysler’s day are numbered regardless what miracle cars they come up with.