Chrysler to Stop Offering Auto Leases

John Horner
by John Horner
chrysler to stop offering auto leases

Just when you thought it couldn't get any more miserable being one of Chrysler's Dealer "Partners" comes the news that the Chrysler Financial is out of the lease business! The Wall Street Journal reports the decision with a note that "Chrysler is expected to brief dealers formally later in the day in a conference call". Boy, it must suck to find this out in the news before getting word from corporate. Nardelli's previous claims that renegotiating bank loans is just a routine matter have been blown out of the water. That $30B revolving line of credit only runs through August, and IF Chrysler is able to get it extended the terms will surely be much more costly than before. Negotiations must be going very, very badly for Chrysler to take one of the most popular sales financing tools off the table. One has to wonder if come August any new lending will be of the Debtor in Possession variety.

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  • Motownr Motownr on Jul 26, 2008

    Wait till customers get a load of their new pricing options. To get close to a typical 36 month lease rate, ceteris paribus, CLLC is pitching a buy at 60 months. Typical customer will be underwater almost until the end of the contract....that's sure to help sales. Leasing was a wonderful tool to 'juice' consumption...but like any kind of financial leverage, it plays both ways.

  • Jcp2 Jcp2 on Jul 27, 2008

    "Even if you had a perfect credit score and high income, you would have difficulty obtaining an SUV from a third-party leasing company that would make any financial sense..." I would assume that most people in this demographic don't lease. That is, if they had any financial sense, which a perfect credit score might indicate. I know lots of people with high incomes and no financial sense, and probably a crappy credit score (once their house gets foreclosed on).

  • John Horner John Horner on Jul 27, 2008

    "That is, if they had any financial sense, which a perfect credit score might indicate." A whole lot of people are looking very smart right now for having leased their SUVs and monster trucks. When the lease is up they turn it in and are done with it.

  • Pch101 Pch101 on Jul 27, 2008
    I would assume that most people in this demographic don’t lease. That is, if they had any financial sense, which a perfect credit score might indicate. That's actually not true. Leasing has had broad appeal to a wide demographic. SUV's had higher than average lease rates across the industry (something more than 20%). As a vehicle class, they tended to appeal to higher income earners who were willing to get trucks that often carried luxury and near-luxury price tags. The point, though, was that anyone would have trouble right now getting great leasing terms for an SUV, whether that's Cerberus or you and me. The problem for Cerberus's creditors is that is that they aren't going to lend money to support Chrysler's leasing program if they can't reasonably predict the vehicle's future values. Factor in a global credit crunch, and it's understandable that it would be difficult to attract money to bankroll the leasing of unpopular vehicles. Since Cerberus isn't going to put their own investor money into it, they are going to pull the program because leasing would only lose them money. Cerberus' priority is cash flow, not moving units at a loss. If the consumer wants to lease a Caliber, the dealer should be able to work something out through a third-party leasing company. It won't be a subsidized lease, so the terms may not be great, but the option will likely be available to someone with decent credit. But getting a lease for an SUV is going to be difficult, if not impossible, and they are going to need even larger incentives to sell them. There are plenty of indications that Chrysler is in trouble, including falling sales, rising inventories and a lack of popular vehicles. This leasing cancellation just may not be one of them. I'd say that it's more of a byproduct of having too many SUV's and trucks in their portfolios than it is about Chrysler per se. Since creditors don't want to provide leasing money for a fleet of gas guzzlers, and since Cerberus wants immediate cash flow, they're going to have to sell them instead. I wish them luck, because God knows, they're going to need it.