Chrysler Financial no longer offering leases

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According to the WSJ:

Chrysler will brief dealers on a conference call later today to inform them that Chrysler Financial will no longer accept lease agreements.  Ford's financing arm wrote down 2.1 Billion in loses due to leases on thursday.  Chrysler Financial doesn't want to go through the same issues. 

Chrysler has also been trying to get a 30 billion dollar credit renewed by 20 banks.  That credit is backed by car loans, loans to dealers, and leases.  That 30 billion represents just under half of Chryslers 70 billion portfolio of working capital. 

In the near term Chrysler Financial will likely see increased costs in August which will make it harder for the company to offer low interest loans on their vehicles.  That'll make it harder for dealers to move the vehicles on their lot and slow vehicle sales for Chrysler even more.

Alan Helfman, a dealer in Houston who was informed of the change by Chrysler, said the change will make it more difficult to sell vehicles because a number of rebates and sales incentives kick in when customers lease through Chrysler Financial. "It will hurt," he said.

[06Hemiman]

I can see how this might be bad for chrysler.  I don't personally lease vehicles because I like to own them for 10 years or so but doesn't the bank usually lose money on a lease?  I mean I don't know how it works exactly but the only thing paid down is the depreciation and the car isn't really paid off at the end.  Chrysler just gets it back, now they have a used vehicle to sell and they have to deal with it.

[squat]

A quick update:

Chrysler Financial is now saying that a lot of the incentives that went along with leasing vehicles will now be available to people that are buying vehicles in hopes of improving sales.  Specifically they'll offer financing that will allow for low monthly payments typically only found with leases.

[hemiram]

A quick update:

Chrysler Financial is now saying that a lot of the incentives that went along with leasing vehicles will now be available to people that are buying vehicles in hopes of improving sales.  Specifically they'll offer financing that will allow for low monthly payments typically only found with leases.

I wonder how they'll work that out.  The lower payments for 3 years and then refinance???  Basically putting the person on an 8 year loan or something similar.  8 years is a long time to have a loan out for a vehicle.

[squat]

Another update:

The new program includes many 72 month finance deals that probably come with a small interest rate. 

The Company is able to achieve this by repackaging incentive resources from leasing to retail. Helping achieve these low-finance payments are special retail finance rates and a bonus consumer cash program in which customers can now receive up to $2,000 cash back on select retail purchases when financed through Chrysler Financial.

As part of our annual August model-year clearance, we are leveraging the move from leasing to retail purchases to offer our customers the best deals of the year and make buying as affordable as renting,” Vice Chairman and President Jim Press said. “We have re-packaged our incentive spending typically spent on leasing into retail purchase packages to lower monthly payments on select vehicles from the Dodge Caliber and Dodge Charger to the Chrysler Town & Country and Jeep® Liberty. With the model year ending on 2008 vehicles, the time to buy has never been better.

Returning lease customers will receive a Lease Loyalty incentive up to $750 for use towards the retail purchase of an eligible new Chrysler, Jeep or Dodge vehicle. The disposition fee, up to $425, will be waived by Chrysler Financial.

Special deals for August also include the continuation of 0 percent APR for 72- month deals on the Dodge Ram, Dodge Durango, Chrysler Aspen, Jeep Grand Cherokee and Jeep Commander.

For those customers who still wish to lease a Chrysler, Jeep or Dodge vehicle through an independent financial institution, they can take advantage of Chrysler’s Customer Cash Allowance on select vehicles up to $2,000.

[gman]

I agree with hemiram.  I still don't understand how they'll figure out how to make the payments lower unless it's a longer loan.

[dodger098]

I'm wondering if this means that no leases on any Chrysler vehicle will be allowed at all.  Chrysler financial is just one bank, other banks still do leases but I wonder if they'll be permitted to with this rule in place.  My sister in law always leases her vehicles, so does a buddy of mine at work.  They say it works out great for them because they don't have to worry about repairs and they get a new car every 3 years.  If chrysler opts out of that market then they're sales numbers are going down even more.