Comments on: What Exactly Does GMAC Do?

By: jberger

jberger — Tue, 07 Oct 2008 12:39:34 +0000

Scott,

Owning a business does not make you rich, it makes you work your ass off.

The reason many businesses choose to lease, rather than buy, is to avoid being trapped into stupid depreciation rates which reduce the businesses flexibility.

Imagine if you have a fleet of purchased trucks and are locked into a depreciation schedule that forces you to keep them for years, but gas doubles or triples in price after the purchase. (Never gonna happen, right?) The surge in gas prices is tripling the costs of running the fleet, and putting a real crimp in cash flow and margins.

Your competitor leases his trucks for 2 years at a time, so he can “opt” out of the present trucks in another few months and move over to say a Sprinter that gets 3x the mileage of the existing trucks.

Business leases are more about flex, cash flow and depreciation advantages than bottom line costs. Wanna deliver another blow to the economy? Kill leasing and force everyone to purchase, then see what happens to the Medium and Heavy Duty Truck market.

By: Under_the_Bus

Under_the_Bus — Tue, 07 Oct 2008 02:35:45 +0000

GMAC’s job is to lose money.

By: ihatetrees

ihatetrees — Tue, 07 Oct 2008 01:22:13 +0000

Deepsouth:
A 25 year GMAC employee told me in confidence a few days ago that he wanted to retire in 5 years. This is what stunned me…” I sure hope we last that long.”

I long ago lost my ability to be shocked at the myopia of domestic auto workers.

And while I have some love for certain GM/Ford vehicles, I wouldn’t buy anything they make new or warranty.

By: yankinwaoz

yankinwaoz — Mon, 06 Oct 2008 22:12:51 +0000

GM Marketing Maven Mark LaNeve wants GMAC to loosen up its leasing policy

Of course he does… It’s not his or GM’s ass on the line if they do.

By: BlueBrat

BlueBrat — Mon, 06 Oct 2008 21:12:35 +0000

leases still make up some 12 percent of the American new car market

I’m surprised it’s that low TBH.

By: Kevin

Kevin — Mon, 06 Oct 2008 19:42:48 +0000

Leases are the sub prime mortgage of the auto industry.

On the bright side I’m almost able to buy GM in my IRA. I mean, buy out the whole corporation. What would I do with it??

By: Landcrusher

Landcrusher — Mon, 06 Oct 2008 19:36:27 +0000

Bundling is a financial term for putting a bunch of rotten eggs in a pretty basket. They would be much better off selling the loans off singly to individual investors.

By: akitadog

akitadog — Mon, 06 Oct 2008 18:46:23 +0000

leases still make up some 12 percent of the American new car market

I wonder what is the percentage of the new car market for luxury vehicles. 12%?

By: hltguy

hltguy — Mon, 06 Oct 2008 18:09:50 +0000

Just checked the stock market report, GM market cap is down to $4.7 billion dollars and the stock just hit a 54 year low (adjusted for inflation). Ford has sunk to $3.40 per share.
Does anyone really think these companies can avoid bankruptcy, I mean really?

By: ScottGSO

ScottGSO — Mon, 06 Oct 2008 17:44:42 +0000

This won’t solve the lease problem one way or another, but I’m thinking this is a great time for Congress to end the tax deductibility of leases for businesses except for bona fide pick-up/work/delivery vehicles. For years, there’s been a generous subsidy in the form of tax deductibility for leasing expensive autos for people who own their own businesses (doctors, lawyers, real estate agents, accountants etc.) Now that the domestic auto industry is pretty much out of the leasing business, this would be a prime time to end tax deductibility of auto leases. Basically, it is a large subsidy to already rich people to buy what are now almost exclusively foreign autos. Why should doctor x or lawyer y get essentially a 35% discount on their car payment for their S-Class when Joe six-pack has to struggle to pay for their Focus without any help? This boondoggle has never been justified, but it is beyond not justified now given that it is a direct subsidy to foregn auto companies without any benfit for the domestics. Any senators read TTAC? (as if!)

By: Lichtronamo

Lichtronamo — Mon, 06 Oct 2008 17:44:23 +0000

It sounds like they’ll be lucky to last 5 weeks.

By: Deepsouth

Deepsouth — Mon, 06 Oct 2008 17:32:14 +0000

A 25 year GMAC employee told me in confidence a few days ago that he wanted to retire in 5 years. This is what stunned me…” I sure hope we last that long.”

By: no_slushbox

no_slushbox — Mon, 06 Oct 2008 17:27:29 +0000

Possibility number 1: The economy sucks, GM goes Ch. 11 – The residual value of GMs tanks and a number of lessees default.

Possibility number 2: The economy does well (ha!), global economic health forces oil above $200 – The residual value of GM SUVs tanks.

By: Casual Observer

Casual Observer — Mon, 06 Oct 2008 16:21:50 +0000

GMAC is also in the real estate and mortgage biz, so it’s a triple ouch for them.

By: menno

menno — Mon, 06 Oct 2008 16:19:39 +0000

Remember, folks; GM sold 51% of GMAC so that the bad debts of GM would not reflect on GMAC, allowing GMAC to go ahead and suck money out of the “system” at a better interest rate, increasing profits (that’s a funny one) for both GMAC and GM. (OK, that was the plan, anyway).

Given the law of unintended consequences, now that the Econopolypse is upon us, GMAC isn’t taking the losses “for the GM team” on leases any more – since they’re now in an independent league. So to speak.

By: Lichtronamo

Lichtronamo — Mon, 06 Oct 2008 16:14:47 +0000

Isn’t this an example of why GM should have never sold controlling interest in its “captive” finance arm in the first place?

By: Point Given

Point Given — Mon, 06 Oct 2008 16:14:44 +0000

GM’s leasing plan was to lease the vehicle today to make $3,000 then take it back at the end of the lease to lose $5000 thanks to ridiculous residual values.

Does anyone wonder why GMAC isn’t interested in leasing.

By: nudave

nudave — Mon, 06 Oct 2008 16:04:09 +0000

It appears the answer to your question is “not much”.

By: Buickman

Buickman — Mon, 06 Oct 2008 15:59:59 +0000

as usual, no one is held responsible.