Another era appears to be coming to an end: the car lease (at least for American automakers). Americans will now have a tougher time renting vehicles they couldn’t afford to buy.
This, in turn, will make it harder for car makers to push cars off the lot. It’s also a small part of the overall reduction of credit that our debt-fuelled economy is going through (WSJ):
Ford on Tuesday began telling dealers that it is essentially ending leasing deals on most trucks and sport-utility vehicles. GMAC LLC, GM’s financing arm, is also expected to rein in leasing offers in the U.S. soon, possibly this week, people familiar with the matter said. On Tuesday, it said it will no longer offer subsidized leases in Canada. Chrysler last week said it is ending all leasing deals in the U.S.
What combined to kill these car leases? You guessed it:
- high gas prices (which are destroying the resale value of any fuel inefficient cars)
- skittish lenders (who wants to lend to an automaker’s finance unit?)
Last week, Ford wrote down $2.1 billion because of unprofitable leases. A similar fate awaits GM and Chrysler’s lending units too. For GMAC about $14 billion of $33 billion in lease assets could be written down.
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