Financial giants such as GMAC financial Services and Ford are cutting back the amount of leases in the US; GMAC stopped leasing in Canada and Chrysler said it will cut them out completely.
Leases are simply a terrible product for the manufacturers. Chrysler Financial loses, on average, 5k on each lease turn in – probably a wise move to plug that hole.
Another major reason is the low residual values released by the company setting the baseline for the industry, Automotive Lease Guide. Their new residual values are based on the forecast of gasoline being as high as $6 per gallon in the upcoming years. This anticipated forecast is the reason for lower residual value on new vehicle. Low residual values make the manufacturers more uncomfortable than Shaquille O’neil trying to driving a Smart car.
I wonder if Automotive Lease Guide CEO John Blair gets invited to many new car industry functions? He’d probably be the guest of honor at a used car function though. As lease options dwindle, residual values plummet and new car prices continue their rise – automotive shoppers will surely turn more of their attention to shopping for the best used car values possible. The Northeast and the Midwest may see the highest concentration of shoppers considering their options within the used market. (28% of sales in the Northeast are leases; 24% in the Midwest)
Obviously the hardest hit vehicles are Pickup trucks and SUV’s. Small cars will actually see an increase in their residual values. Check out the these new value projections after 36 months: (incl. ‘07 residual values after 36 mos.) Source: Automotive Lease Guide.
Full-Sized Pickup Trucks
Nissan Titan: 2007:Â 41% | 2008: 30.2% [projected worth;Â % of sticker price after 36 mos.]
Dodge Ram 1500: 2007:Â 35.9% | 2008: 26.5%
Full-Sized SUV’s
Ford Expedition: 2007:Â 44.3% | 2008:Â 32.6%
Chevrolet Tahoe: 2007:Â 42.1% | 2008:Â 31.7%
Mid-Size SUV’sÂ
Ford Explorer: 2007:Â 42.7% | 2008:Â 31.8%
Chevrolet Trailblazer: 2007:Â 35.2% | 2008:Â 27.2%
Small Cars
Honda Civic: 2007:Â 51.8% | 2008:Â 57.5%
Ford Focus: 2007:Â 37.7% | 2008:Â 46.7%
Automobile consumers have to ask themselves: “Do I want to throw away up to 73% of my vehicle’s value?”
