Auto Leasing: Is It Going To Go Away?
In this world, I've long believed that people are either new car/truck buyers, used car/truck buyers, or someone who leases a vehicle. These days, those in that third category are feeling the heat. It's coming from higher interest rates, and being squeezed by the car/truck they are driving.
That pinch has longtime fans of leasing re-evaluating if it's a smart financial move. Take the person who is stuck with a gas guzzling SUV who wants out. Sure, they can go through firms like Leasetrader.comto get out of their deal. But then what? Do they go out and lease another more fuel efficient model? Or do they stop leasing and become a buyer?
Chrysler is hoping that happens now that Chrysler Financial is getting out of the leasing business. I'm not sure I buy that. I suspect most customers will re-up through private leases when their old deals are up. The terms won't be as good as they were under Chrysler Financial two or three years ago, but for many people leasing the offers will be good enough to sign up for another 2-3-4 years.
Will other auto finance firms follow Chrysler Financial and stop offering retail leases? I wouldn't be surprised. There will be plenty of questions for GMAC and FordMotor Credit in the weeks and months to come. The answers may not be appealing to either the public or automakers. The market has raised interest rates and with residual values for larger vehicles plunging due to a lack of demand you see how automakers are caught in a bind.
Saving GM: Wed. August 6th
Speaking of tough choices, don't miss our CNBC documentary Saving GM, which airs Wednesday August 6th at 9 eastern. For the last year we have gone inside GM to look at it's problems, promise, and potential to turn around it's struggling auto operations. From test driving the new Chevy Camaro in Australia to spending days with CEO Rick Wagoner in China, to exploring the problems confronting assembly line workers in Michigan, Saving GM is a rare all-access look at the country's largest automaker. There's a sneak peak of our time with Dale Earnhardt Jr. test driving the Camaro in Australia. Check it out then check out Saving GM on Wednesday August 6th on CNBC.
Questions? Comments? BehindTheWheel@cnbc.com