http://blogs.edmunds.com/strategies/2008........-august-1-through-its-financial-arm.html
Saw this subject on the late news last night. Local dealer was interview, stating they are against it due to 40-48% of their product movement was due to leasing. Very low residual value. Also was mentioned Chrysler in negotiations with Tata of India in regards to Jeep. Hopefully for sales market and not sale of the brand.
Capt Skup
AD-1(AW)USN Ret.
Wonderful Wife, 3 beautiful Daughters
"Never get in a battle of wits with an unarmed man"
Problem with leasing is that the residual values that are coming into play today at lease-end were set 2, 3, or 4 years ago at lease inception when the market was normal. Now folks like Chrysler who sell rapidly-depreciating vehicles are getting hit with lease turn-ins that are worth less than half the residual at auction. Granted, it was difficult for the automakers to see this one coming.
I am curious what the percentage of leases are, between light trucks and cars. Article in the news stated that GM, Toyota, Honda and Ford are not being hit so hard because of a greater mix of their product line, not so truck/SUV dependent. I have never leased a vehicle, probably never will.
The problem with Chrysler is the corporate average MPG's are not going to be able to meet CAFE figures. They have to many gas hogs. The Jeeps get real bad MPG's and that may be why they are thinking of dropping the line. They have one diesel engine for the jeep that does not meet 50 states emissions standards. If they move to a 50 state compliant diesel they will save the jeep line as they can improve the MPG's by 25% with a good diesel. Sill, they need a smaller vehicle that gets high MPG's to bring down corporate average. The residuals at lease end on bad MPG vehicles will be down no matter what brand. On the other hand the HONDA's that get high MPG's have retained value and are a great lease as a four year old can be worth 60% of MSRP which is extreemly high.
trop-a-cal wrote: The problem with Chrysler is the corporate average MPG's are not going to be able to meet CAFE figures. They have to many gas hogs. The Jeeps get real bad MPG's and that may be why they are thinking of dropping the line. They have one diesel engine for the jeep that does not meet 50 states emissions standards. If they move to a 50 state compliant diesel they will save the jeep line as they can improve the MPG's by 25% with a good diesel. Sill, they need a smaller vehicle that gets high MPG's to bring down corporate average. The residuals at lease end on bad MPG vehicles will be down no matter what brand. On the other hand the HONDA's that get high MPG's have retained value and are a great lease as a four year old can be worth 60% of MSRP which is extreemly high.
Believe me, the Jeep brand isn`t going anywhere! and yes most of our cars get terrible MPG`s. if they would switch over to a mass air fuel metering system instead of the antiquated speed density system the MPG`s would probably go up a significant amount to make a difference.
As far as the leases. other than buisnesses that lease, no one leases anymore! maybe in some markets, but not enough to keep it going.
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I also saw it mentioned that Chrysler, Ford and GM were all getting out of lease bussiness on the NBC news last night. The dealer that was interview was saying that 20% of his bussiness was lease's.
Jeff
2007 Dodge 1500, SLT ThunderRoad, 4x4, QC, 3.92, 20" Wheels 2006 Ford F350 6.0L PURCHASED BACK BY FORD! 8/28/07
2003 Ford Expedition, 5.4L
2001 Harley Davidson FLHT
Believe it or not when we bought our Subaru Tribeca, the salesman actually went over the disadvantages as well as advantages of a leased car. IIRC The biggest disadvantage was leasing a car that depreciated too fast. At the end of the lease you would pay more than the car was worth and if you traded it for another lease you would lose as well. Best case for the consumer was for the car to hold resale value.
Jeep is in deep doo doo as far as EPA numbers. Probably why they green lighted the Compass/Calibur to add to their line up. It is also probably another big reason they are canning the Commander soon. Chrysler has too many Hemi's and not enough of anything else.
Keith99RS wrote: Believe it or not when we bought our Subaru Tribeca, the salesman actually went over the disadvantages as well as advantages of a leased car. IIRC The biggest disadvantage was leasing a car that depreciated too fast. At the end of the lease you would pay more than the car was worth and if you traded it for another lease you would lose as well. Best case for the consumer was for the car to hold resale value.
Jeep is in deep doo doo as far as EPA numbers. Probably why they green lighted the Compass/Calibur to add to their line up. It is also probably another big reason they are canning the Commander soon. Chrysler has too many Hemi's and not enough of anything else.
FWIW I thought most cars ran MAF sensors now?
when your lease is done you walk away? At least youre not upside down like so many people are these days. High residuals=lower lease payments and vice versa. You know exactly where you stand when you sign the papers and if the market takes a dump the lease company eats it. The problem with buying today is if you want to remain in a newer vehicle like you would with a lease you either need a big downpayment or finance for 3 years or less to keep from getting upside down. My last truck, a 2004 F1504x4 was financed for 5 yrs, I had $3k down and at purchase and 2.5 yrs later at trade in on my duramax I tossed another $5k from savings on the principle. I still had to roll a loss into my new truck. Now I see locally Ford is offering new F150 ext cab 4x4's for $20k with employee pricing and incentives, what about the poor bastard that just paid about $6k more last week? He's got a brand new new truck and hes already taking it from behind. Funny thing is, by now we all should know late july is fire sale season in the auto industry, we're idiots for buying sooner.
2007 Montana Mountaineer 307RKD
2006 Chevrolet 2500 4x4 crew Duramax/allison
Here is what Chrysler has to say on the employee web-site.
Q - What announcement did Chrysler make in the last week?
Landry
Well, there are trends in the marketplace that are really having an effect on people’s pocket books and disposable income. One of them happens to be leasing. We’ve done leasing for 25 years in the business and 20 percent of our business is leasing - right with the industry average. But what we’ve noticed recently is that the cost of funds to do business at leasing is causing the monthly payment to go up for the consumer - not because of us, but the pass-through that comes from the banks we do business with. So therefore, we find out that as leasing gets more expensive, it’s getting less desirable in the marketplace. Therefore, we had to determine an alternative - maybe get ahead of the curve a little bit on leasing, and determine a way to make sure we do our customers a favor and offer them a solution - not just a regular retail solution, but one in which they can see the difference in terms of owning versus renting, for example. In today’s environment, owning makes a lot more sense than renting a car because nobody knows what the value of that car will be 36 months from now. And when you own, at the end of the term on your loan, you have a down payment again. The used value on that vehicle is the down payment on your next car. So, in a sense, the payment stays the same, you have a down payment to get into your next car, so the only thing that changes is the term.
Q - Does that give consumers more flexibility?
Landry
A lot more flexibility. There’s no penalties. You can pay your loan off whenever you want. You can trade it in whenever you want, and in a lot of cases it’s more flexible than a loan.
Q - How does this impact customers who want to lease?
Landry
Customers who want to lease continue to go to the Chrysler, Jeep or Dodge dealership of their choice, and our dealerships will have other financial instruments for leasing. As a matter of fact, we will continue to offer our dealers an incentive based on the dealer doing an independent lease with a third party.
Q - What about customers who currently have a lease? Are they affected?
Landry
Our customers in Chrysler, Dodge and Jeep that currently lease our vehicles - no problem. Everything is okay. Continue to drive the vehicle until the lease matures, and then go to your Chrysler, Dodge or Jeep dealer and you can either switch to retail - we have terrific deals on switching to retail, or the dealer will likely have an avenue to secure a lease in that time frame.
Q - Are there any offers to keep the current lease customers in the Chrysler family?
Landry
Yes, we have a $750 loyalty certificate for those who are coming out of a lease - maturing out of a lease - and whether they lease or purchase another vehicle from our dealers, they will qualify for the $750. And, by the way, the disposition fee that every lease has at the end of the maturing lease, is now waived with this circumstance.
Q - What are some of the new financing offers from Chrysler for the last week of July?
Landry
Well, we think they’ve really made a difference, too. We have 0 for 72 - zero percent financing for 72 months. We had it on our Ram pickup truck for the entire month and we’re gangbusters on Ram pickup trucks this month. We will surpass our targets by 2 to 3, 000 units by Thursday night when the month ends. And on Friday of last week we also rolled in our SUVs under the 0 for 72 as well, and the dealers are telling me that’s really building some traffic.
Q - In the long term, do you think Chrysler will get new customers with our new finance deals?
Landry
I think as we come to the end of this month, and Friday is August 1, we’re going to have new finance deals - not only on the 0 for 72 range - but also some great finance deals in the 5 - 6 point range and the 48 month format because a lot of people might want to go from a 36 month lease to a 48 month purchase - not all the way up to 72. So we’re going to have a wide array of options for our customers. August is going to be a great month as we roll our incentive program out on Friday.
Q - What are you most excited about in terms of the products coming from Chrysler?
Landry
Currently the products at Chrysler we’re having a very good success with, especially our four-cylinder cars - Caliber, Compass and Patriot, and even Sebring and Avenger. In fact, the convertible’s setting a record this year for sales. But it’s not just the smaller vehicles. While mpg is very important, five-star crash rating is important, too, and the Dodge Journey has been selling extremely well in its first three months in the marketplace. Dodge Journey is a great vehicle for storage, for kids. And the minivan is finding its way into the hands of people who want to trade in V-8 SUVs. Those who have kids and animals that need space - they still need the storage space, but they still need a V-6, so Chrysler Town & Country and Dodge Caravan is making its way into an area we didn’t think it would before. And on top of all that we have the Dodge Challenger which, okay, it’s not an mpg car, for sure, but the Dodge Challenger - the ‘08 model is sold out - we have enough orders for the ‘09 through the month of November. So the Dodge Challenger has really hit the market strong, and really gives our brand -not only the Dodge brand but our company a great feeling of confidence moving forward.
Q - What do you think about the new Dodge Ram?
Landry
I took the new Dodge Ram home a couple of weeks ago, and then a week ago as we continue to do a little fine-tuning in the end. The truck is fantastic. Usually trucks don’t turn heads but this truck was turning heads - not just because it’s new, but it rides in a very bullish manner, and it makes a statement. It’s subtle, but it still makes a statement. The truck is so versatile, with it’s storage in the side of the truck, and also with the various components like the MDS (Multi-Displacement System) - 8-cylinder cut to 4-cylinder MDS fuel saving economy setting that it has on it. Also the Chrysler Aspen and Dodge Durango hybrids launched to the public in October. We’ve had a lot of interest in those vehicles, especially because of the hybrid technology. So we’ve got a pretty good lineup going into the fourth quarter.
A message to U.S. employees, retirees and contractors from Chrysler LLC Vice Chairman and President Jim Press:
July 25, 2008
Dear Colleagues,
Today we and Chrysler Financial shared plans with our dealers to take advantage of developing trends in the economy and the car-buying environment by enhancing retail financing incentives and moving away from leasing.
The economic conditions that made leasing popular in the past have changed, and the pendulum is swinging back in favor of purchasing and financing. Credit is tight and expensive, and residuals are unpredictable. These two factors have made leasing more expensive to the point of not being in our customers’ best interest. Therefore, effective Aug. 1, in order to protect our customers, provide great deals and allocate resources effectively, Chrysler Financial is shifting its incentive strategy to focus its resources on purchasing and financing offers.
Chrysler’s new incentive strategy will create finance deals with low payments, typically found only on lease deals. With these deals, customers can get low monthly payments with the benefits of ownership. With this strategy, we look to attract more purchase-oriented customers and shift our lease customers to purchasing and financing.
To drive customer loyalty, we will offer customers great new vehicles with retail finance deals with payments similar to leases. In addition, Chrysler Financial will waive its termination fee on returning lessees, and we will offer a $750 bonus for returning lease customers who purchase an eligible new retail vehicle.
There will be no impact on customers who already are leasing Chrysler vehicles. Chrysler Financial will continue to support and service current Chrysler, Jeep and Dodge lease and balloon-contract holders. Going forward, an example of our excellent financing deals includes 0 percent APR for 72 months on Chrysler Aspen, Dodge Durango and Ram, Jeep Commander and Grand Cherokee models. We also will work to have products where the monthly finance payment is equal to the payments of a 36-month lease.
Lastly, Chrysler’s U.S. company car programs for employees and retirees will remain the same. Employees and retirees who purchase vehicles directly through dealers are encouraged to talk with their dealers to discuss financing options.
The industry is changing rapidly, and we are moving quickly to be in position to take advantage of those changes. We thank you for you support and your continued commitment to Chrysler.
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