The Truth About Cars » Leasing The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Thu, 17 Jul 2014 17:51:25 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Leasing Off-Lease Vehicles Set to Flood Used Car Market Along With More Former Rentals Mon, 27 Jan 2014 10:00:38 +0000 Car Key with Leasing Tag on White

In 2013, 3.2 million new cars and light trucks were leased in the U.S., an almost threefold increase from 2009. The 2014 Manheim Used Car Report, produced by one of the larger used vehicle auction companies, says that the auto industry will have to change the way it remarkets cars if it is going to successfully handle the increased volume of off-lease vehicles.

According to Automotive Newsthe Manheim report also warns that dealers who take in off-lease vehicles on behalf of lessors (so called ‘grounding’ dealers, “will not be willing or able to acquire the same large share of off-lease units that they have in recent years.”

The previous time when large numbers of off-lease cars and trucks went on sale was in 2002, and the glut of off-lease vehicles lowered residual values and used car prices then. This time, though, the increased number of off-lease vehicles this year will find a more favorable market. Used car prices are currently relatively high and “residual adjustments” likely will be not be large, Manheim says.

One thing that may make reselling those vehicles easier will be the growth of certified pre-owned programs. In 2002, the CPO market was less than 40% of the size of the total off-lease volume. The report says that today’s certified-used market is 23% larger than the total off-lease volume, so the CPO market today can absorb a much larger portion of off-lease vehicles.

Still,going forward into 2015 and 2016, lessors need to improve their remarketing procedures and expose off-lease vehicles to as many potential buyers as possible.

Another complicating factor is that sales of new cars and light trucks to rental companies went up 1% in 2013, which means that a year or two from now, those rental vehicles will end up on the used market. However, while the 1.6 million units sold for rental was the highest rental fleet volume since 2007, it’s still far below the 2.1 million rental units that were sold in 2005 and 2006.

The domestic American automakers decreased their market share for rental fleet sales for the third year in a row, now at under 65%. By comparison, Hyundai’s sales to rental companies rose 73% to 118,000 units, the biggest increase in rental fleet sales among all automakers.

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Bright Future For Auto Lending in 2014 Fri, 20 Dec 2013 15:19:29 +0000 Dealer Customer Stock Photo

According to credit reporting bureau TransUnion, auto finance has a bright future ahead in 2014, with easier access to credit and bigger loans for consumers.

The company expects the average debt load per auto consumer will be $17,996 by the fourth quarter of 2014, up $1,000 from Q4 2013. TransUnion’s Vice President of Automotive Peter Turek says this is good news for all involved, as high demand for vehicles will lead to more loans and incentives as both lenders and dealers compete for consumers.

Of course, one downside to this new gold rush comes from subprime lending and the delinquencies they tend to spawn in their wake, though Turek believes they will remain at levels far below those found at the start of the Great Recession in 2008 in part due to strong used-car prices. TransUnion notes that 29.8 percent of all loans in Q3 2013 are subprime, nearly five percent lower than in Q3 2008 when the bottom fell out.

Leasing will also have it good in 2014, though TransUnion was mum on how good beyond stating it would be better than 2013, where 1.3 million leases were signed in the first half of the outgoing year. Turek says that, much like strong used-car prices, leasing will also offset delinquency rates, as financing for leases are made upon new cars for consumers with above-average credit ratings.

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Ally Exits Superprime Loans, Enters Used Car Market Tue, 12 Nov 2013 10:00:11 +0000 Renaissance Center

Best known for underwriting public radio programming such as “All Things Considered” and “Marketplace,” Ally Financial — formerly known as GMAC until the subprime market collapse kicked off the Great Recession — has decided to go for the gold in the used car and leasing markets, citing “irrational” pricing found in the superprime mortgage loan sector for its move from the latter toward the former.

The other reason? Better returns on investment; according to Ally CFO Chris Halmy, leasing a vehicle takes more expertise than conducting a low-risk, low-return superprime loan. Thus, Ally can gain more from financing a lease or used car purchase while still remaining inside a low-risk bubble.

As for its current lease and used car financing operations, 29 percent of Ally’s total originations came from leases while 27 percent came from the used car lot in the third quarter of 2013, up 2 and 3 percent respectively from the same time last year. Total originations for the third quarter netted the organiztion $9.6 billion, unchanged from Q3 2012.

Regarding future plans, Ally is planning to buyout the United State Treasury, which currently holds 74 percent of Ally. There are also plans for an IPO, but when is still a matter to be discussed behind closed doors.

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Quote Of The Day: Score One For The Car Mags Edition Fri, 11 Nov 2011 23:37:24 +0000

The New York Times has a story that’s fascinating in its own right: the number of people leasing a car on without first test-driving the car has doubled since 2007.  Troubling stuff for most auto enthusiasts among us, but probably not much of a surprise to readers on the retail side of the business. One auto broker explains the most common reasons for taking this leap of faith:

Generally these are people who know what they want, whether it’s because they’re very brand-loyal or they’ve fallen in love with the styling of a particular model. Same goes for buyers who are strictly interested in getting the best deal, and those with limited choices like a big family that needs a nine-passenger vehicle with 4-wheel drive.

But, as one “enthusiast” explains, some consumers are just so well informed, they don’t need to drive their car before they buy it. That’s what they subscribe to magazines for!

Here’s how Charles Van Stone,  “retired human resources executive and well-read car enthusiast,” sees it:

I never test-drive a car, but I do subscribe to five different car magazines. So by the time I’ve read all these different opinions and finally sit behind the wheel, I have every reason to believe it’s going to be exactly what I wanted… Whether it’s because of my emotional connection to the car or all the reading I’ve done, I have never been disappointed. I’ve never bought a car and thought “Uh-oh, this was a mistake.”

Given that Mr Van Stone most recently ended up in a Camaro SS, it’s safe to say that how it drives per se wasn’t his overriding concern anyway. Which is a good thing, because if a “well-read car enthusiast” asked me, I’d have told him to drive the more playful V6 before committing to the SS. But then, my idea of what an “enthusiast” might be interested isn’t the only one… and ultimately, if the guy is happy, he’s happy. That’s all that matters, especially with a car like the Camaro.

But the strangest thing about Mr Van Stone’s representation of the test-drive-free lifestyle is his reliance on the automotive media. Though I wasn’t in the least bit surprised to see analysts reference the rise of online research as one possible explanation for the test-drive downturn, I was not expecting the Times to quote someone letting his buff book subscriptions “take the wheel” in an auto buying decision. On the one hand, it’s a rare show of relevance for the mainstream automotive media. On the other hand, their champion is a guy who bought his car without even driving it. If such is the modern automotive enthusiasm, I wouldn’t rush to overstate the vitality or relevance of the media outlets that nurtured it.

At the end of the day, no form of media can replace a test drive. No Youtube video, no spec sheet, no eloquent review is a substitute for actually driving the car you are considering committing to. At least, it can’t if you actually care about the details of a driving experience. And you should: understanding the nuances of car control can make you a more efficient, courteous, and above all, a safer driver. Conversely, the fact that more people are buying cars without having ever driven them does not speak well of our collective relationship with these powerful, dangerous, expensive machines. And though the car industry needs people to be passionate about the act of driving in order to thrive (and not merely survive), its collective answer to this trend thus far has been to introduce more distracting gizmos. Apparently it really isn’t important to drive cars anymore… as long as we keep buying them.

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Shocker: 45% Of Premium-Brand “Buyers” Actually Lease Mon, 01 Aug 2011 23:22:41 +0000

Polk’s Tom Libby takes a penetrating look into the obvious and reveals that American luxury car buyers rarely actually buy their cars, reporting:

Industry-wide, leases comprise about a fifth of all new vehicle registrations, but within the luxury market, lease penetration is more than twice as high at 45%. Three premium makes: BMW, Infiniti and Mercedes-Benz, actually have national lease rates at or above 50%…

These extraordinarily high lease results lead to several conclusions. First, the price of the vehicle is not the be-all and end-all. Rather, the monthly lease payment is a crucial factor. The monthly payment is not completely linked to the price, as the OEM and dealer have several tools by which to manipulate the monthly payment; these include, among other things, artificially raising the forecasted residual amount and increasing/decreasing the up-front lease payment. Second, if your premium make is not in the leasing business, you need to get there right away. Lastly, your lease rates, residuals and drive-away costs need to be competitive.

While there’s a lesson about America’s ceaseless desire to live beyond its means in there somewhere, the real lesson here is this: with sales coming out tomorrow, be sure to remember that not all of them are actual sales. Also, this is the reason you never see those “Don’t Laugh, It’s Paid Off” stickers anymore…

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BMW Seeks A Million New… Rentals? Tue, 22 Mar 2011 21:40:02 +0000

Think BMW sells a lot of cars in the US? The German automaker may have registered nearly 20,000 “sales” in the US last month, but according to the analysts at Polk, over 50 percent of its “sales” in 2010 were actually leases. No wonder BMW’s best-seller, the Dreier (3 Series), occupies a nearly unique position on the price-volume frontier. And apparently BMW will continue to look to non-sales for future sales growth, as Automotive News [sub] reports the firm has launched a new car-sharing joint venture in Europe aimed at bringing in a million new customers by 2020. The pitch: sleek new Bavarian metal, as well as the ability to pick up and drop off vehicles anywhere, thanks to smartphone vehicle tracking. But the biggest pitch, say BMW sources, is to people who would never buy a new BMW… or even lease one. And they’re not just talking about poor folks either…

According to BMW sales and marketing chief Ian Robertson, the joint venture with German car rental giant Sixt isn’t so much about gaining new sales but about reaching urban consumers who are no longer choosing to own an automobile. In short, we’re looking at the endgame for automakers in mature markets: whereas leases are a good way to bring more buyers into the luxury brand they desire, this is about reaching well-off customers who simply are no longer interested in owning cars for a number of financial, environmental, and congestion-related reasons. BMW now joins Peugeot and Daimler in offering car-sharing programs in Europe, as consultants Frost & Sullivan project that by 2016, some 5.5 million Europeans and 4.4 million North Americans will use car sharing programs. At least in the dense urban cities of the developed world, car ownership is starting to sound so last century…

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February Sales: Leasing, Incentives and Price Wars, Oh My! Wed, 02 Mar 2011 17:37:54 +0000

Remember the phrase “jobless recovery”? Well, the auto industry is having something of a “price dropping recovery.” The headline for February auto sales may have been “the buyers are back,” but beneath the big volume boosts there’s trouble a-brewing. According to TrueCar’s transaction price forecast (above), Hyundai CEO John Krafcik was right to warn of an industry price war, as the industry has lost .3% of its average transaction price during the last year of recovery. Over the last year, Honda, Kia, Toyota and GM have all seen declines in average transaction prices, led by GM’s staggering two percent drop. And falling transaction prices are just the beginning: as we explore after the jump, incentives are also remaining high, and yet another volume-boosting technique is enjoying a boom as the industry once again starts to redline its sales.

Though both TrueCar (top) and Edmunds (bottom) show small declines in average incentive spending, the recovery in volume clearly isn’t having the desired (or expected) effect on incentive spending. And as with transaction prices, GM is the big loser on the incentives front, outspending the competition according to both reports, and recording one of the biggest year-over-year increases in incentive spending. But, argues TrueCar’s Jesse Toprak

The industry average for incentives is the lowest for February since 2007. The perception of a pricing war and overindulgence of using incentives is exaggerated. Automakers are now using incentive programs that are much more favorable. They are no longer spending as much upfront by offering customer and dealer cash and are instead pushing low APR and leasing programs.

But not everyone sees the combination of weak pricing, resilient incentives and high lease penetration as such a benign influence. Edmunds’ Jessica Caldwell argues

General Motors and Nissan are showing the biggest year-over-year boosts in incentives among the top six automakers. It isn’t any coincidence that also reports that both companies saw their highest single-month lease penetrations in at least the last decade.

And in a WSJ piece, Caldwell singles out GM for a drubbing on this point

“For people who want to come in and buy a Buick or Cadillac, leasing is another alternative that sales people can guide them too,” Caldwell said. And while leasing has helped lift retail sales, it also poses a problem for the auto industry as many of those cars will be re-sold in a few years, flooding the market.

For example, 48% of the Chevrolet Malibu models sold by General Motors Co. (GM) were leased, a figure that is “way too high,” according to Caldwell. Caldwell said leasing made up 38% of Chevrolet Cruze models sold last month, and 69% for the Buick Regal.

GM also spent a lot on incentives this month, which helped lift sales. Caldwell told Dow Jones that when the auto maker’s first-quarter figures come out, “there will be a lot of questions on what they spent on incentives, because it’s going to be a lot.”

Now, a 48% lease mix may be “way too high,” but at least it’s an older vehicle. High numbers for the brand-new Cruze and Regal are far more worrying. And given that GM’s leases are so high, incentives are up (and at the highest levels in the industry), and transaction prices have fallen in the last year, it’s looking like the industry might be OK but GM is trying to buy volume however it can (to be fair, GM’s 21% fleet mix shows some discipline). And if a player as big as GM keeps trying to redline its sales, it’s only a matter of time before it drags the industry into a real price war. That’s good for consumers, but it’s bad news for an industry that’s still trying to recover pricing even as it recovers volume.

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EVs Are Great, Just Don’t Buy The Battery Tue, 22 Jun 2010 18:40:56 +0000

After one year of ownership we would expect EV residual values to be above the segment average expressed in terms of pound values. But, if the battery is owned rather than leased, and lacks the appropriate extended warranty, the value of the typical EV will then fall dramatically until the vehicle is five years old, at which point the car will have a trade value little more than 10 per cent of the list price

So says Andy Carroll, managing director of the British car-buying bible, Glass’s Guide. He tells BusinessCar that Nissan and other firms launching EVs in Britain should take out the battery cost and lease it to customers with minimum monthly performance clauses. This, he says, would dispel concerns, drive sales, and transform the resale picture. It’s also what Project Better Place is doing, albeit in a complete regional package with battery-swap stations and charging infrastructure.

OEMs should take notice: almost everyone has had a bunk battery in a cell phone or laptop at one point or another. And losing performance or range in a car is a lot different than having to plug in your phone every 12 hours. Besides, BMW got 450 people to pay $850 per month for MINI E “test” leases (and yes, their range went down in the cold). When the earlier adopters will pay enough each month to lease a CRV, Odyssey, Insight and Fit only for an electric MINI with less room (sorry mate, need room for the batteries), why not keep leasing? The luxury market runs on leases, why wouldn’t the EV market?

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Detroit Tops May Incentives, Residuals Rise Regardless Mon, 07 Jun 2010 14:17:41 +0000

Once again Detroit finds itself atop Edmunds’ True Cost of Incentive ranking of the top seven automakers [via earthtimes], as the domestic OEMs spent about $1.7b (or, about 60 percent) of the $2.8b paid out by the entire industry on incentives last month. Trucks were the most heavily discounted segment, with average incentives running around $4,650, or nearly 13 percent of the average segment sticker price. Saab spent the most by brand, slapping an average of $6,813 on its vehicles, with Lincoln coming in second at $4,987 per vehicle sold. Saab’s incentives equaled 17.1 percent of its average vehicle price, while Chrysler gave away about 12.2 percent of its average vehicle price last month.

Despite giving away more of their vehicles’ value than the foreign competition, Detroit has some surprisingly good news on the resale value front. Well, Ford and GM, anyway, and really, the resale news couldn’t have been much worse. According to Automotive News [sub]:

Automotive Lease Guide projects that 2010 vehicles from continuing GM brands and 2010 Ford brand cars will retain more than 40 percent of their sticker prices after 36 months. Five years ago, the residual forecasts for those brands’ cars except Cadillac were under 40 percent.

So, considering that Toyota and Honda enjoy about 51 and 54 percent of their original value after 36 months respectively, that’s not exactly break-out-the-champagne news… but it could have been worse. It could have been Chrysler:

Chrysler brand 2010 vehicles, in aggregate, have the industry’s lowest projected residual among continuing brands at 39.4 percent after 36 months, 2.1 percentage points lower than its 2005 projection. But the aggregate residual value for Chrysler Group’s Dodge brand is up a dramatic 8.2 percentage points to 41.8 percent. This does not include Ram brand trucks.

Ay Caramba! Needless to say, both Ford and GM’s resale value improvement (and Chrysler’s lack thereof) is largely attributed to new product. According to ALG’s chief economist:

All new models always have a price bump. The average is a 7 or 8 percentage-point bump for an all-new model compared with the old one

Lower inventories aren’t hurting either, and Edmunds is projecting that late-summer incentives won’t reach their typically fire-sale-like levels because automakers simply don’t have the inventories to shift. But as Detroit makes a slow comeback on resale, other firms are charging ahead. And until incentive discipline on the ground matches the tough talk of sales and marketing execs, these minor gains based on product cadence won’t be enough to keep up with the competition. After all, the three-year resale on a Chevy car is only .10 percent better than a Kia. The work is not over.

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Capsule Review: 1994 Infiniti J30 and the Magic Lease Sat, 05 Jun 2010 20:16:48 +0000

“We need young, college-educated people like you,” the man said, “because the old way of selling cars is dead and gone. That’s why I was hired — to bring the dealership into the present day.” And with those thoroughly self-deceived words, the new sales manager at “Infiniti Of Columbus” welcomed to me to the team in March of 1994. It was the end of winter in Ohio, but it was just the middle of Infiniti’s long winter of discontent. We had three products. There was a facelifted Q45 which precisely nobody wanted. There was a facelifted G20 which cost nearly as much as a Lexus ES300 while closely resembling a Nissan Sentra inside and out. Note, however, that the G20 shared nothing but the engine with the aforementioned Sentra. On any given month, we would sell two G20s and no Q45s. In fact, during my entire six months’ tenure at the store, we only sold two Q45s, one of them to a salesman who was quitting to go work for Merrill Lynch.

It was the new-for-1993 J30 that kept the lights on and paid our meager draws against commission. The jellybean-shaped, rear-wheel-drive sedan was available as a J30 or J30t. Neither car had any options available: in an amazing reductio ad absurdum of the Japanese export philosophy, the equipment list was the same for every single car that came off the boat. The “t” model added HICAS four-wheel-steering, a rear spoiler that truly spoiled the otherwise interesting design, and some cross-spoke wheels. They were hideously expensive — $37,995 and up in an era where an LS400 could be had for fifty grand or less — and they were both controversial-looking and suspiciously similar to a Nissan Altima at a distance. (Jerry Hirschberg designed ‘em both.)

It didn’t matter. We rarely sold any outright, but more than 20 would leave the lot every month thanks to the Magic Lease.

The head honchos at Nissan USA knew the car was overpriced, and badly so. Their solution was elegant. The oh-so-English Jonathan Pryce was hired to do a series of advertisements about “the astonishing J30″, and a genuinely astonishing lease program was put into place. $1500 down, $399 a month, 36 months, 36,000 miles. Extra miles were cheap and the dealership management always just threw the down payment away, so most people paid about $450 a month, tax included, for a 45,000 mile contract with nothing out of pocket. “t” models were $15 a month more.

The numbers were ridiculous. The cars were “capped” — sold to Nissan Financial — for about $34,000. The three-year residual was expected to be about $29,000. Ha! We had six-month-old buyer’s-remorse specials on the lot that wouldn’t fetch $29K. Nissan was just sending its problems into the future. Who cares? At that price, we could make them disappear.

Still, plenty of buyers could think of reasons to look this gift horse in the mouth. Almost nobody liked the looks. The trunk was minuscule and the rear seats didn’t fold. The sunroof was steel, not glass. The car was noisy and cramped inside. Although it was essentially a four-seat 300ZX, it wasn’t a four-seat 300ZX Turbo, which meant it was slow. (JDM variants got a 4.1L V8 and a turbo 2.5V6, as I recall.) Infiniti had virtually no brand equity, to put it mildly. We all learned that our best chance to move the iron was to convince unaccompanied spouses to sign before the better half could show up and say, “$399 is a lot for an Altima.”

The irony was that there was plenty to love about the J30. It was put together like a Zenith El Primero. The materials quality shamed both Lexus and ze Chermans. The “t” was a little spooky at high speeds, since the HICAS never seemed to give the same response twice in third-gear corners, but that was part of the fun. The stereo was damned good. It really felt like a high-quality piece.

My new boss was new to the auto industry. This was good, because he didn’t do anything that sales managers typically did, such as scream incoherently for no reason. He let us take weekends off. Most importantly, he didn’t understand the NADA Guide and therefore he always paid Dealer Retail for trade-ins. Once I understood that, I called my father and he dragged his boat-anchor Audi 100LS into the shop, crossing his fingers that the transmission didn’t perform its usual gearchange gymnastics during the test drive. His wish was granted and he left with two $399/month J30s. One was triple black, the other was blue with a cream interior. Most importantly, they were 1994 models. The 1995 car was chock-full of cost-cutting and it was obvious when you sat in one.

Our no-hassle sales philosophy and enlightened approach to customer satisfaction didn’t help us sell used cars at Dealer Retail plus a few grand. The lot filled up. The floorplan overflowed. One day the dealership principal showed up at the building. It was before noon and he was sober. These were bad signs. The sales manager was escorted out of the building. The replacement was a fat, oily Macedonian fellow from a Hyundai shop in the iffy part of Columbus. His first official act was to wholesale most of the used lot at a six-figure loss. His second official act was to fire the sullen-looking college kid who parked his Kawasaki Ninja on the showroom floor in the evenings. Thus released, I walked the earth like Caine, or at least rode it like a douchebag, until my next dealership job. It was there that I witnessed a salesperson exchange sex for a chance to sell a Thunderbird, but that’s another story.

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Piston Slap: Drive It Like You Lease It. Then Don’t. Mon, 12 Apr 2010 17:44:34 +0000

Anthony writes:

I currently own a 2006 Acura TSX, 6-speed manual, with 32,000 miles. I’m also leasing a 2008 Mazda Miata for 2-years. I’m giving the Miata back in September of this year and it’s way under milage. I have two questions about my TSX:

1) Because of the mileage, I want to drive the leased Miata as much as possible. How little can I drive the Acura without it becoming detrimental to the car’s health? Is there anything I should be doing when I am driving it? Currently I drive it about 1 day every 2 weeks and make sure the A/C compressor is on.

2) How similar is the 6-speed transmission in the TSX to the 6-speed unit in the Civic Si. I’ve heard that’s a problematic transmission and that you should not skip-shift it. I’ve had no problems with the TSX’s transmission thus far. Your thoughts?

Sajeev Answers:

Combining the two questions into one (completely illogical) inference, I believe you need to rev and shift the living daylights out of your Miata to it all out of your system before the fragile transaxle in your TSX is your only mode of transport. That said, let’s answer your questions. Seriously this time.

Question 1: so the lease on the Miata runs out in about six months. You could easily put the TSX under a cover, let it sleep the entire period and have no problems after your final goodbye at the Mazda dealer. While I would continue your current TSX exercise regiment, extend the intervals to every 2 months. It’s nice to have the luxury of time to listen for trouble spots that might creep up after the Miata’s gone. Then again, I expect nothing will go wrong, especially if you garage it.

Question 2: Google is most inconclusive; hopefully the Best and Brightest can help. The trouble prone unit is used in the Accord and Civic, so it’s probably used in the TSX. If you haven’t joined a TSX owner’s forum yet, you really, really should. One universal truth: everyone treats manual transmissions differently, and most wrong-wheel drive transaxles start losing their integrity when people get stupid.

But I think you are fine. If you are a gear jammer at heart, find a car with a beefier driveline…something with a T-56 transmission for your right hand fits the bill nicely. And don’t lease it, either.

(Send your queries to

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Piston Slap: Playing Stratego at the Roundel Wed, 17 Mar 2010 16:14:57 +0000

Andy writes:

Sajeev, I enjoy your posts on TTAC and I wanted to ask a quick lease negotiation question. Currently BMW has very good lease rates on their 5 series models. Is there a smart way to renegotiate the 10k mile/year limit? That just seems like a lot of money for 10k miles per year.

Sajeev answers:

Unless you are a very profitable business, enjoy tax loopholes for gigantic SUVs and just gotta have a new ride every 2-3 years, leasing isn’t great for anyone. But conservative fiscal policy aside, I’ve yet to see a negotiable mileage rates in a lease. That’s not to say you shouldn’t ask, but the (corporate level) finance guys usually lock that in.

I’d attack from a different angle: complain about the mileage limit and insist on leasing for Invoice price minus ALL factory incentives, including the ones given to dealers in their holdback. Don’t worry about being a tightwad, dealerships make good money on leasing. Not to mention they probably won’t give you all of that holdback anyway, but you still gotta play hardball.

Not only do the words “invoice” and “holdback” get a salesperson to take notice, they’ll take action if lowering the car’s transaction price sells the lease. Because lowering that price is far, far easier to finagle on the dealership’s part.

Hopefully you can make the numbers work from a different angle.

(Send your queries to

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Incentives, Fleets Fattened February Sales Wed, 03 Mar 2010 15:23:03 +0000

Chrysler once again topped Edmunds’ True Cost Of Incentive index last month, despite failing to significantly improve its sales over February 2009′s miserable showing. The only upside is that Chrysler basically held even with reduced incentives, as the entire industry is spending about 14 percent less on incentives than it did a year ago. Another interesting point of analysis from Edmunds:

Comparing all brands, in February smart spent the least, $341 followed by Scion at $426 per vehicle sold. At the other end of the spectrum, Lincoln spent the most, $5,568, followed by HUMMER at $5,195 per vehicle sold. Relative to their vehicle prices, Saturn and HUMMER spent the most, 14.9 percent and 13.6 percent of sticker price, respectively; while Porsche spent 1.4 and smart spent 2.3 percent.

But Toyota and GM will help carry those numbers up next month, with huge incentive spends planned. Meanwhile, after many automakers found religion about retail sales last year, fleet sales are back in a big way. And they’re no longer seen as something to be ashamed of.

Automotive News [sub] reports that only 35,832 of Chrysler’s 84,449 sales last month were to retail customers, with the remaining 58 percent going to fleets. Despite the fact that this combined with Chrysler’s chart-topping incentives doesn’t exactly speak to the company’s viability, Chrysler spokesfolks were unapologetic, saying:

Fleet sales were very strong this month, and our company sales reflect that. We still expect our total fleet sales for the year to be around 25 percent. It’s a good viable business for us. It shows that large companies have faith in our company to order. We make money on fleet sales

And none of the automakers are being snobbish about fleet sales. Ford’s fleet sales rose 74 percent compared to last February, and GM’s fleet sales rose 114 percent, making up nearly a third of all GM sales according to Automotive News [sub]. GM’s leasing (another former sin) also rose last month, to make up ten percent of all deliveries.

This time last year, fleet sales, incentives and leasing were considered part of the huge collection of problems that brough American automakers to their knees. Now that they’ve received their bailouts, the old habits are coming right back. And there are always excuses: sure they make some profit and yes, they will always be part of the business. But with incentives going up and Toyota looking vulnerable, a discount war is looming on the horizon. If Detroit once again gets caught up in a negative spiral of volume-pushing through incentives, fleets and leasing, any chance of a sustainable turnaround could be hamstrung. Those who fail to learn the lessons of the last several years have no business being in business.

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Bailout Watch 579: GMAC To Score $3.5b More Thu, 31 Dec 2009 16:20:36 +0000 The artist formerly known as GMAC

The underlying cause of GMAC’s failure was no different than so many other American financial institutions: giant bets on risky mortgages at the height of a real estate bubble. And though that error alone would have qualified GMAC for a bailout rescue along with the other failed banks, The WSJ reports that the ongoing support for GMAC is “reflects the troubled company’s importance to the revival of the auto industry.” And man, it had better be important. The GMAC bailout has been one of our least-favorite of the season, rewarding poor practices in auto and mortgage lending, and exposing taxpayers to inordinate risk. But, as TTAC warned back in the pre-bailout days, once the camel gets a nose into the tent, good luck getting it out. And so, GMAC will be receiving another $3.8b in TARP support, on top of the $12.5b it has already received. As a result, the US taxpayer’s stake in GMAC is expected to rise above the current 35 percent stake, just in time for more write-downs planned for the next week. The cash injection is said to prime GMAC for a profitable Q1 2010, erasing some giant losses in the bank’s ResCap mortgage unit. And of course the move will help GMAC continue to underwrite the leases that Chrysler and GM so desperately need, but can’t afford due to plummeting resales. GMAC’s bailout often doesn’t get marked up in the auto industry bailout tally, but at over $16b so far, it’s one of the crucial pieces keeping the zombie automakers shambling along. Now, about repayment…

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