Filed under: Car Buying, GM
GMAC dramatically cut back on leases in September
Leasing is down industry-wide by about 50% from 2007 levels, but General Motors' captive credit arm took an even bigger bite out of its vehicle leasing in September. GMAC leased only 2% of all GM products in September, and the decision to do so had everything to do with the recent events of the financial markets. While leasing was down GM-wide in September, GMAC and Chevrolet were hit the hardest. The General's two volume brands accrued only .6% and .7% of its sales through leasing, compared to 11.2% and 13.6% respectively last year. Leasing is virtually non-existent for vehicles with low residuals, and Cadillac, which typically leases over 40% of its vehicles, leased at an 8.4% clip last month. Nobody on Wall St. is purchasing securities right now, giving GMAC very little money to offer leases to its customers. A controlling interest in GMAC was purchased by Cerberus well before the private equity firm took control of Chrysler. Chrysler stopped leasing all together on August 1 in response to the huge losses it took on returned leases of SUVs and trucks. Both GM and GMAC say the break from leasing is only temporary, but with the financial markets still in flux, don't expect this trend to reverse itself any time soon.
[Source: Automotive News, sub. req'd]
Reader Comments (Page 1 of 1)
TJ 11:15AM (10/06/2008)
A well thought out post that hits the nail on the head in passing.
MOST people here have no idea about the secondary markets, the ABS and CDO's, the swaps and the derivatives. I for one, would LOVE to see AB post up a comprehensive explanation about the secondary markets, and how the upheaval in the ABS markets are going to bleed into leases, purchases, credit cards, student loans, etc.
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BrianFL 11:25AM (10/06/2008)
Did anyone see 60 Minutes last night about Tesla motors and the Chevy Volt? Why wasn't that announced on here? If I didn't watch 60 Minutes as my Sunday ritual I would have never known.
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TJ 11:26AM (10/06/2008)
???
What does that have to do with leasing and securitization declines?
Use the 'Send Us A Tip' link for crap like this.
Ayatollah Rodriguez 12:35PM (10/06/2008)
Brian the mainstream media is so far behind it is sad.
The Media harps about Volt and Tesla as if they were announced yesterday. I heard Bob Lutz say the same thing he said at least 100 times before.
Also, mainstream Media seems to think that Volt will be a GM savior. According to GM itself they are planning to lose money on Volt through the first generation, which in GMs case is 5-7 years. Media does not understand and doesn't want to understand that Cruze is BY FAR more important to GM than Volt.
TJ 2:17PM (10/06/2008)
Ayatollah... you ignore scalability. GM may lose money on each G1 of the VOLT, but the platform scalability (Saab, Cadillac, etc) and the other vehicles this tech will appear in globally will make the overall G1 platform profitable.
Richard S. 1:23PM (10/06/2008)
I wonder how will these affect future sales. Usually those that lease, become a captive customer 36 to 48 months down the road. However if you purchase your vehicle over a 60-72 month period and you haven't built much equity (or is even upside down), more likely you will stick with the car and even many that have built equity migth plainly decide to not lease again and stick with the car until paid off and save on future monthly payments.
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Shadooky 1:31PM (10/06/2008)
For the past 8 years I have leased some form of GM vehicle and wanted to lease again but was unable to do so.
OH Well, I am happy with my LEASED Mazda.
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AZMike 1:55PM (10/06/2008)
it's interesting that GM is the company mentioned. this is an industry-wide trend, and it will be the high end imports that have been hit even harder.
the US head of BMW had spoken in Automotive News about the need to cut leases. BMW presently leases over 70% of the vehicles it markets in the US, and they plan on cutting this to the mid-40% range.
all the high-line manufacturers have been losing tremendous amounts of money when the cars come in at the end of lease, when they go to auction. the residuals that had been written 3 or 4 years ago are not remotely connected to what the vehicles are actually bringing, which today is usually at least $10,000-$15,000 less than residual value.
no company is crazy enough to keep bleeding like this. leases will also be discontinued by the high-line companies as well, or payments will double or triple to reflect the real-world residual value.
I think this will result in drastic drops in sales of high-line imports. the average person, let's say, that leases a 3-series BMW for $399 per month will not want to step up to the plate for a payment of $750 per month for 72 months on a purchase contract.
AZMike
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alex 2:24PM (10/06/2008)
While it isn't good that GMAC can't offer many leases because of market conditions, isn't the fact that GM cut their leasing to a greater extent than other companies AND still saw a better % change in sales than competitors last month a good sign?
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why not the LS2LS7? 4:06AM (10/07/2008)
My father ended up buying an Impala because he couldn't lease a LaCrosse. He is upset about the end of leases. But I think the fact that they were so financially advantageous to him is a big reason why they shouldn't have been offered in the first place. You don't make money by giving it away.
One thing to remember in this article is GM only owns 50% of GMAC now.
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