I watched this story last night on NBC Nightly News. I was amazed at how much stupidity could be combined in a single story. It begins by saying the auto lease was the key to millions of Americans purchasing more car than they could afford, and if you watch the follow up story, it ends with auto dealers talking about how it is their most profitable way to conduct business.
The end to many lease programs is prompted by the dramatic drop in value of SUVs and trucks. The premise of a lease is the lease company will have a vehicle return at the end of the lease period that is worth a given value. With skyrocketing gas prices, vehicles that are not fuel efficient are dropping just as fast as gas is going up making it impossible to accurately predict the end of lease value.
Going back to my days of selling cars, I remember how we always pushed the lease. When selling the lease, we steered the entire conversation to monthly payments. Once we found a payment that the customer was happy with, all the terms were set up to ensure we sold the car to the lease company at full MSRP thus getting the extra large commission that almost never happened on a typical purchase. The finance department would also set everything up ensuring they made the maximum profit. Leasing a vehicle is the most expensive way to drive a car and I am glad to see it going away!
If you go over to ‘thetruthaboutcars.com’ they have had pretty good ongoing coverage with their ‘GM death watch’ and ‘Chrysler death watch’
Gm is also on the hook to GMAC to refund the difference in residuals for what the returned vehicle actually sells for and what the lease stipulated… real mess…
It seems as though for GM to pull out of this, it needs to declare bankruptcy, restructure, and Publicly execute their management in the town square(ok maybe not execute, but dump the whole lot of them)
Comment by Zintradi — August 1, 2008 @ 10:51 am
Did you see this morning; GM posts a 15.5 billion dollar loss for the second quarter!
Comment by Joel — August 1, 2008 @ 11:33 am
ok, maybe we’re back to executions
Comment by zintradi — August 2, 2008 @ 3:43 pm
You mean people will actually have to save up to buy a car and pay a car loan so they actually own a car after three years? Shocking! How awful to have to actually drive something you can afford rather than impress others by driving something beyond your budget. It’s about time, is all I can say.
Comment by Barb — August 5, 2008 @ 9:13 am
it’s not as bad here … I read a figure that something like 25-30% of us lease a car… In canada, the number is more like 45-50%.
Comment by Zintradi — August 11, 2008 @ 10:08 am