You may be wondering why the mainstream automotive press hasn't carried our story about GMAC's exit from the GM leasing biz. I've re-checked with my sources. Although there's a lot of confusion out there– at the corporate and dealer level– we stand by our story. In Canada, GMAC leases are dead. In the U.S., GM and GMAC will avoid a media shitstorm by "refocusing" its dealer finance products away from leasing. In that regard, GM will do whatever it takes to keep monthly payments roughly even on a finance versus a lease contract. They will promote longer term finance contracts with subvented rates on most lines, and combine that with "finance cash." Or they will offer customers cashbacks for use in cash deals or financing/leasing by third party sources such as a bank or finance company. (For example, a GM half-ton truck will receive zero percent financing for up to 72 months plus finance cash of $3K or a cashback incentive of $5,000.) We hear that GM will support leasing until Thursday night; the full changeover of finance/cash incentives will not hit until first thing Friday morning. (Just in time to get lost over the weekend, as usual.) Dealers speculate there will be a lot of fiddling with the incentive programs over the next few months to see what has the most customer appeal. But incentives there will be, and LOTS of them. [hat tip to you-know-who-you-are]
Find Reviews by Make:
Read all comments
AP has a story on it today. Damn you guys are good!
Anything about Gm going away, and you guys nail it!
The old proverb about, “As GM goes, so goes the economy.”
Never truer. Lets wish them ill will….
These days inside GM headquarters must seem like 1945 in Berlin at the Fuhrers HQ. The competition (Toyota and Honda) will now have an even greater advantage in selling (leasing) vehicles and GM’s market share will drop even further
Right,you cannot lease a GM in Canada as of Monday.
For some unknown reason we Canadians love to lease?This could impact Canadian car dealers more than we think.
On the other hand here in Oshawa we got about 2000 people that got a 24,500$ after tax car voucher in thier pocket.
Monkey boy that self serving proverb came from GM via a former GM president in the 50s
from wikipedia
In 1953, Charles Erwin Wilson, then GM president, was named by Eisenhower as Secretary of Defense. When he was asked during the hearings before the Senate Armed Services Committee if as secretary of defense he could make a decision adverse to the interests of General Motors, Wilson answered affirmatively but added that he could not conceive of such a situation “because for years I thought what was good for the country was good for General Motors and vice versa”. Later this statement was often misquoted, suggesting that Wilson had said simply, “What’s good for General Motors is good for the country.”
There are a few other “old proverbs” that are turning out to be not so valid anymore:
“war is good for the economy”, and “the GOP is good for small business” come to immediately to mind.
Can’t lease a Cadillac? Ruh-Roh.
[Meanwhile…my IT manager just got one of those Hyundai Genesii (?), black on black. Its a sharp car, man.]
you can still lease.
you just have to live in the USA. (unless that changes)
ttac story was written too brodly. GM will stop leasing in CANADA
monkeyboy:
Would you prefer that TTAC not report the news? Chrysler and GM getting out of the leasing business is BIG news.
The reality is that Cerberus, through its 51% ownership in GMAC, OWNS The General. They are simply taking the steps they need to take to stem future losses on leases. GM has no option but to go along and try to spin it as best they can.
For the past decade or so, GMAC has been the tail that wags the dog through the income they threw off from autombile and home financing. Let’s not forget that not long ago, GMAC was the largest mortgage company in the country. GMAC’s profits kept The General afloat, and their sale of a controlling interest in their cash cow was a clear sign of how desperate The General had become. Now Cerberus controls the purse strings, and is forcing GM to dance to their tune.
Hmmm, Cerberus shuts down ChryCo leasing and GMAC Leasing. Then, in a few months, they can re-introduce leasing through Chrysler Financial, and they’ll have a HUGE selling advantage against GM, and they can keep GM on the ropes thorugh their control of GMAC. All they have to do is keep ratcheting the underwriting tighter and tighter at GMAC. Just trying to protect their investment, don’t you know…
Wouldn’t we all like to have the ability to prevent the competition from selling their product? “Can’t lease a Silverado? Come on Down!, and we’ll lease you a new Dodge Ram!”
He Who Has The Gold Makes The Rules.
Cerebus does NOT own the General. 51% to 49% isn’t “yanking the purse strings.” Cerebus demanded an inflow of cash from GM to keep GMAC afloat. GM apparently told them to go fish. As they should. GM is still dealing with Delphi bailout and UAW buffoonery to stay afloat.
So you actually believe that someone would take a Dodge over a Duramax/Allison just because they can lease it?
Quite a stretch there. Have you owned/driven either? I have. The Duramax is doing just fine.
Didn’t TTAC report months ago that Cerebus was going to flip and strip Chrysler.
Damn! Care to update?
you can still lease. you just have to live in the USA. (unless that changes) Why would GMAC make a distinction between Canada and U.S. markets? Answer: they wouldn't. Still, we're waiting for this shoe to drop… So you actually believe that someone would take a Dodge over a Duramax/Allison just because they can lease it? Whatever the qualitative difference between these two vehicles, a good percentage of both are sold to commercial customers. For tax/accounting purposes, many of these customers prefer leasing. Only now the ones shopping Dodge, can't. Didn’t TTAC report months ago that Cerebus was going to flip and strip Chrysler. Damn! Care to update? We do, all the time.
Do I detect a little backpedaling? Offering attractive finance offers, making closed end leases less attractive and more in tune with current residual values is not exactly getting out of the lease business as reported.
Perhaps a retraction?
gamper :
Again, GMAC’s Canadian leasing is dead. Confirmation here [via Globe and Mail]:
“General Motors of Canada Ltd. told its dealers Monday in a closed-circuit broadcast that it is getting out of the leasing business effective Aug. 1.
Instead, the sales leader in the Canadian market will offer alternatives such as interest-free loans for as long as six years in hopes of keeping monthly payments on vehicles purchased with loans close to what monthly payments would have been if the vehicles were leased.
“This is an earthquake in the vehicle financing business,” said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.
Dealers and other industry sources said other auto makers will likely follow suit, since GM and Chrysler sell about 36 per cent of the new vehicles delivered in Canada annually.”
And again, if it’s dead in Canada, it’s dead or decommissioned in the U.S.
I guess I am being too hard on you guys. From all the signs, you are probably right, though they technically may continue to offer leases, in practice they may be all but dead. As the market recovers, and on hot selling cars with good residual projections, perhaps there is room to make a comeback.
Canadians like to lease for two reasons:
* It either defers or lessens the tax paid (when you pay 8-18% sales tax, this matters!)
* We have less disposable income than Americans.
* Lemon laws are weaker here and a lease makes it easier to dump a problem vehicle back on the manufacturer.
Personally, I’d lease for the first reason alone. If I were buying a European car, I’d be insane not to lease. Do you want to get stuck with a five year old VW?
This is going to do real damage to GM (and especially Saab and Cadillac) in Canada. It’s hurt most in Quebec and Ontario, the two biggest markets. It’ll also wound GM’s burgeoning product efforts (Malibu, Lambdas, Astra) by giving people a really good reason to look at the competition
Well I sure don’t wish GM ill will in spite of their misguidedness. There are a tremendous number of average Joe’s & Jane’s that rely on them for a job; a rather hard commodity to come by these days. Take all of the suppliers and the support services into consideration and there are an enormous number of people that rely on GM’s viability.
Robert Farago : look you may be right.
but at this time, GM has only stated they are killing leasing in Canada.
to state for a fact that USA lease’s are done for, is at best a good rumor. Unless you have a source that you can name that usa leases are dead as well?
Otherwise its just tabloid journalism
Ah, it’s getting snarky, that means the truth must be very close at hand!
GM not being able to lease in Canada is, in my mind, much worse than if they can’t lease in the US. Why?
1) Canadian dollar is worth more than US dollar.
2) Canadian car prices are higher than in US
3) 40% of Canadian customers lease
4) Canadian sales are more likely to grow over the next five years due to better economic conditions
So even though we are so US centric in our thinking, losing Canadian leases sucks for GM. And if they’re losing the Canadian leases (which have a better chance of making GMAC money, see 1-4) then the US leases are more likely gone as well since they’re not worth as much to GMAC.
@opfreak: Being on the cutting edge of news sometimes cuts the one writing the report. If you are ahead of everyone else you run the risk of appearing to be biased. I can see TTAC falling into this category. I, too, however would like to see corroborating news items on this. That said, if GM does announce that US leases are dead expect a big fat “I told you so” from TTAC… :)
The more I think about this, the more I realize the GM has essentially ceded everything except it’s die-hard customers to Toyota, Ford and Honda Canada. They’ve never had much of an urban presence, and this has essentially torpedoed whatever chance Saab and Cadillac had in Toronto, Montreal and Vancouver. Rural markets might be ok, but the disposable income is less and everywhere GM is, Ford is too.
If Ford is smart (and sufficiently liquid), they’ll hold the line on leasing and benefit from the dead cat bounce in suburban and rural markets; hopefully Toyota doesn’t put the hurt on them too badly.
I can’t think of any positive way to spin this.
monkeyboy:
At the risk of a flame war, my statement that Cerberus “OWNS” The General is based on the fact that GMAC finances a huge portion of GM’s production through customer financing/leasing, and through dealer floor plans.
Cerberus can effectively shut down GM by turning off leasing and tightening credit standards at GMAC. While a lot of the business will go to third party indirect financing, it would put a big hurt on GM’s sales and any profits at GMAC, which GM needs. For example, 0% financing through GMAC is dependent on Cerberus’ approval of such plans. If they balk, GM is in a bind.
GM may have told Cerberus to go pound sand when Cerberus asked for a cash infusion at GMAC, but the fact is that GM needs GMAC more than Cerberus needs GM.
I’m mostly trying to draw attention to the fact that Cerberus’ contol over financing at two of the Big 2.5 gives them enormous power over both GM and their wholly-owned Chrysler LLC.
Cerberus can use thier power to drive business to Chrysler. I used the Silverado/Ram example, but it could be any vehicle. My point is that Cerberus can use this leverage to their advantage at Chrysler, and there’s nothing GM can do about it.
When you can buy a worktruck for $15k, you buy, not lease.
Watch Caddy’s sales (well, “units shipped”) figures in particular plument. People lease Caddys. The rest, I dunno. But this just gives the customer another reason not to shop for a GM (or Chrysler) product.
Dear Robert
Why would GMAC make a distinction between Canada and U.S. markets? Answer: they wouldn’t. Still, we’re waiting for this shoe to drop…
Why, because there is a disparity in the MSRP between most Cdn and US models.
This disparity turns in to air once the vehicle enters the used market. Also the Cdn Asset backed paper market is in shambles, there is no place to borrow money for Cdn leases. The U.S. asset backed paper market is still functioning because of the Fed’s injection of huge amounts of liquidity to keep the U.S. markets functioning.
But, ALL of the car companies are going to get out of leasing everything but luxury vehicles and those leases will be usurious. Why, cause leasing toasters is not profitable. It did not take a genius to predict these moves. The big win in leasing for the leasor is the depreciation that they can claim on their taxes that the regular schmoe can’t on their canadian taxes. You folks in the U.S. had the ability to bury it in your mortages till you scr###d that whole industry up. But now that the Cdn dollar has effectively screwed up the MSRP difference to the U.S (and the residual on every car leased in the last 4 years) the lease portfolio’s are under water, the financing is unavailable so the only choice for the Cdn arm is to bail. The same thing may happen in the U.S. but it will be for different reasons, specifically the hit on pickups and SUV’s. Related but not the same. See this is a very complicated business and simple observations and broad statements may sound good, but when you dig into the facts the picture some times changes.
Bottomline:
All the car companies will run from leasing because if they don’t they will get all that business and then 3 to 4 years from now there is a tidal wave of used cars that sink their residuals, and their bottom lines over night.