• Jul 29, 2008
While Chrysler has chosen to get out of the leasing business altogether after taking a bath on vehicles being returned with residual values far below expectations, Ford will reportedly be taking a different approach. Automotive News is reporting that after its finance arm recorded "extreme losses" on its lease vehicles, the automaker has decided to raise prices on its leases for the F-150, Super Duty, Ford Explorer and Sport Trac. Keep in mind that the residual value of these particular vehicles is falling so fast that Ford will be forced to price these leases so high that no consumer in his right mind would actually lease one. So while Ford is not actively removing itself from the leasing business when it comes to trucks and SUVs, its decision to sharply raise prices will have pretty much the same effect.

[Source: Automotive News]


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  • 22 Comments
      • 6 Years Ago
      Seems sensible enough.. why didn't Chrysler take the same approach?
        • 6 Years Ago
        Right. They're not selling any more, so let's make it harder by increasing the prices.
        • 6 Years Ago
        Ford is only taking this approach because the other two are on the ropes.
      • 6 Years Ago
      Subvened leases act as an avenue for manufacturers who cannot compete on their product/image strength to get their cars/trucks on the road by offering compelling payments. Toyota, Honda, BMW and Porsche rarely offer subvented lease programs. And when they do, they rarely get hurt. They subvene the money factor, not the residual. They focus on the strength of their product to attain their sales. It's simple. If a product is hot, there is no need to strap cash to the hood or subvene the leases.
      But artificially raising residuals or lowering money factors(multiply the money factor by 2.5 and that will get you close to the interest rate), you are guaranteed to have your butts handed to you at any Manheim Auction. It has killed Mitsubishi, along with a less than stellar product line, and will sink alot of other manufacturers. I frequent the auctions enough to know this: BMW, Lexus/Toyota, Honda/Acura, Subaru and VW/Audi(other than the ghastly Touareg) do very well by leasing. Everyone else, not so good.
        • 6 Years Ago
        John Don't always believe what you read. I have watched dealers line up on Thursday at Manheim in Pa for 18 years to buy those leases outright. Also, Russian, Nigerian and Middle Eastern auto brokers have no problem paying the end of contract values or much more in many cases. With a barrel of oil at it's current rate, they have all the money with nothing to spend it on, at least in Nigeria and Russia. I can't kick these brokers off my lot on any given Saturday. And I certainly do not understand what they are saying. But they do pay up. And yes, they are making an impact, especially on VW's and BMW's
        Also, BMW has had to rethink it's strategy on leasing X-5's and X-6's. But we are sold out of X-6's.
        As far as $399 a month for a 3 series? Read the fine print. In our ad, you can be at $399 if you have $3999 down plus tax, tags, dpf, security deposit and first payment. Or over 7k! The finance manger at our BMW store is a close friend and states that the average lease payment is well over $750 per month. I assumed much higher.

        • 6 Years Ago
        BMW just reported a loss of nearly 400 million dollars on leases. BMW subvents many of its leases especially 3 series. The reason is that discounts and rebates hurt thier image more then low cost leases. Ever wonder why a 40K BMW 328 leases at the same monthly payment as a 28K Honda Accord. Both vehicles have great resales but BMW subvents their leases, but please keep it a secret because it could hurt image....
      • 6 Years Ago
      Looks V8 to me...
      • 6 Years Ago

      Biz you are correct on 98% of what you said. I disagree with you about VW/Audi and Subaru auction values though.

      Subies are more regionalized than many makes. They are strongest in the NE and the Mountain regions (CO, UT, OR, WA). Anywhere esle they are average at best. But it works for them since those areas are where the volume of their leases term.

      VW/Audi don't do as well compared to their lease end values. Audi performs better than VW though.

      • 6 Years Ago
      A much better decision than just flat-out getting out of leasing...
      • 6 Years Ago
      Yeah, right...

      Good luck with that strategy, Ford...
      • 6 Years Ago
      Let's recap:

      Chrysler: totally out
      GMAC Canada: no subsidized leases
      Chase: no Chrysler leases
      Ford: "unleasable" (for some models) leases for trucks/suvs
      GMAC US: pondering getting out of subsidized leases

      For the domestic manufacturers, this could be the end of leasing as we know. At least for the time being.

      Considering how many luxury cars are leased, I wonder how they will be impacted? Will the imports respond in any way to curtail truck/suv leasing?

      Just wondering.
        • 6 Years Ago
        High end auto manufactures like BMW and MB subsidizes leases to the max. For instance BMW's claims about highest residual value is a total joke since most of their vehicles are on a closed lease and they get back.
        • 6 Years Ago
        Hate to break it to you, but it is far from a 'Domestic' only issue.
        • 6 Years Ago
        It might be an issue with more than domestics, but I am yet to hear BMW or MB getting out of leasing business.

        If they do, they might as well get out of US market considering how many people lease their cars.
        • 6 Years Ago
        Subsidized leases, like fleet sales and rebates have to come to an end sometime. Now is the time. But programs come and go. If sales take a dump too badly, you could see some residual support again. There's all that tooling and overhead to pay for.
      • 6 Years Ago
      johnz , what specifically is "subvent"?
        • 6 Years Ago
        Subvent means to subsidize. A vehicle is supposedly worth X amount after the lease term. Having a higher residual means the consumer will pay less over the lease term. Finance companies realize this and will subsidize the residual by raising it to lower the payment, banking on the money they make now rather than the money they will lose at the end.
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