WASHINGTON – Is auto leasing really dead? Oh, I so hope so.
But, alas, that question was just a headline on a news release from the National Vehicle Leasing Association. The organization, which represents the leasing industry, was responding to news that some auto manufacturers are drastically scaling back their leasing business because it isn’t so lucrative anymore.
GMAC Financial Services, the lending arm for General Motors, reported a net loss in its auto finance business of $717 million in the second quarter of 2008 in part because of weaker performance in its leasing operation. The company said a sharp decline in lease demand and in used vehicle sale prices for sport-utility vehicles and trucks in the U.S. and Canada were to blame.
“As a result of these market trends, GMAC is taking steps to reduce the volume of new lease originations in the U.S.,” the company said. GMAC also said it was discontinuing lease incentive programs in Canada.
Meanwhile, Chrysler announced it was going to “repackage” its auto incentives to make it more affordable for customers to buy rather than lease.
The automaker said its new strategy includes 72-month finance deals on an expanded range of compact, midsize and full-size vehicles. With the longer loan terms, vehicle buyers would end up with payments similar to 36-month lease payments. The company is even offering up to $750 toward the purchase of some new vehicles for returning lease customers.