Not So Wild-Ass Rumor of the Day: GM to Stop Leasing On Monday

Robert Farago
by Robert Farago

We hear from various sources that GM is about to follow Chrysler's lead and stop leasing its vehicles in the North American market. The move is not entirely unexpected; the company that owns the now non-leasing Chrysler Financial– Cerberus– also owns 51 percent of GM's vehicle financing arm, GMAC. Canada's Windsor Star reports GM's no-deal as a done deal. "The financial arms of Chrysler LLC and General Motors Corp. are getting out of the business of leasing vehicles as credit tightens and resale prices for gas-quaffing trucks fall, according to company executives and independent sources." Quaffing? Don't all ICE vehicles quaff? Anyway, the lease cessation is bad news for ChryCo and GM dealers north of the border. "In Canada, an estimated 43% of drivers lease their vehicles, double the U.S. rate of 20%." Ouch. You know residuals are in free fall when a financing company walks away from that kind of action. Meanwhile… "Geoff Helby, an analyst with J.D. Power & Associates in Toronto, said Toyota Motor Corp. and other automakers that offer attractive lease rates and decent residual values could win more business from the Detroit automakers as a result of the move. 'It would definitely put Chrysler and GM at a serious disadvantage.'" Make that "will."

Robert Farago
Robert Farago

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  • AJ AJ on Jul 27, 2008

    I leased a Civic one time and later bought the car. Then when the car was about four years old, I thought about trading it in and the dealer offered me a very good deal for it. At the time I was told that Honda does very well selling their used cars, so I can see why they for one will continue to lease.

  • Detroit1701 Detroit1701 on Jul 28, 2008

    NulloModo, I think that is a great idea. GM should not sell any current models in the rental market -- just extend the previous generation model's production. For example, GM could have just kept pumping out the last-gen Malibu for a few years to sell to Hertz.

  • Kman Kman on Jul 28, 2008

    Let's come up with all the possible "creative spins" on this. I'll get us started with a few: "The open, open, really open-ended lease." "GM. Making leasing history. Um, we mean 'making leasing, history'. " "GMAC: you lease it, you bought it." "GM: would you like to finance, or, um 'rent-to-own'?"

  • Michael Karesh Michael Karesh on Jul 28, 2008

    I posted an entry to my blog a few weeks ago about how the manufacturers were going to suffer huge losses from lease returns. SUVs aren't the only vehicles affected. As someone else here pointed out, resale values for luxury cars are also in freefall. One of my panel members turned in a BMW 545i even though BMW offered to knock $5,000 off the price if he paid to keep the car. Third party lessors MIGHT be in a better position. A friend tells me that they usually buy insurance to cover lower-than-expected residuals. But even if this is the case, how high must the premiums on such policies be now?