What Exactly Does GMAC Do?
As recently as a few months ago, GMAC was the largest auto lender in the United States. Automotive leases constituted over ten percent of their business. One credit crunch later, the Cerberus-owned financing company has almost completely stopped writing car leases, which now account for only two percent of GM’s new car sales. And though such depreciation machines as Chrysler have stopped leasing altogether, leases still make up some 12 percent of the American new car market. Automotive News [sub] reports that GM Marketing Maven Mark LaNeve wants GMAC to loosen up its leasing policy– a move the GMAC boys view as about as desireable as Thunderbird wine. Until bailout bucks stabilize credit markets, bundled auto lease paper will continue to be ignored by investors. And that means GM is at the mercy of its once-captive finance company. Moreover, thanks to GMAC’s private ownership, there’s no telling what the status of its lease and loan holdings are currently, particularly for its ResCap mortgage arm. With GM insisting that GMAC get back its leasing religion, the two firms seem locked in a death-embrace. GM needs leases to move product, and doesn’t mind offloading the risk on its former subsidiary. Until GMAC goes down of course. In that scenario, GM will have far more to worry about that leasing volume.
GMAC's job is to lose money.
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.