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Bye-bye? Car leases are on the endangered species list

Posted Jul 31 2008, 10:06 PM by Karen Datko
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"Brainy Smurf" at Pants in a Can isn't unhappy to see car leasing apparently going the way of the dinosaur. In fact, he's practically gloating.

After seeing an NBC News report on the Big Three automakers' moves to discourage or totally eliminate leasing, he wrote: "Only being able to drive something that you can actually afford?

"How dare they!" he added, snarkily.

According to a Wall Street Journal article at MSN Money, a combination of tightening credit and the falling value of used trucks and SUVs has made leasing a bad business plan. Vehicles are sold at the end of the lease, and U.S. automakers are now taking huge losses on the aging gas-guzzlers.

Chrysler is ending its leasing business outright. The WSJ article says, "Ford aims to make vehicles like the F-Series trucks and Explorer SUVs 'lease proof' by making terms on leases so tight that the monthly payments are too high to justify." GMAC is also expected to make adjustments to the leasing of GM products. (The same doesn't apply to foreign automakers.)

Meanwhile, banks that used to participate happily in leasing plans are backing away as well.

For many consumers, this will mean a downsizing in the vehicles they drive. Leasing allowed them to have something they wouldn't be able to afford if they actually had to buy it.

On the plus side, dealerships are offering all kinds of deals to get buyers into new vehicles. And if you can't afford one, now's a great time to buy a used truck or SUV, if you can also spring for the gas.

At the end of the NBC report, the reporter "said something along the lines of, 'Americans will soon be forced to drive automobiles that they can afford,'  like it was a bad thing," Brainy wrote. "My wife and I just bemusedly looked at one another and chuckled."

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Comments

 

I for one am getting a little tired of all the gloating from personal finance bloggers. This is just adding salt to the wounds of all those who have overextended themselves in debt. Lest we forget, the banks and the system in general have set these people up for such failure and share at least part of the blame.

Megan (Posted 07.31.08 10:20 PM ) Report Abuse

Leasing is good way to obtain a business vehicle for many reasons, but it isn't really of much benefit to an individual.  It allows you to get into a car/truck with more equipment than you could otherwise afford at a lower cost, or it can allow you to get into a vehicle for a lower monthly payment.  The problem is that at the end of most leases, you're stuck either purchasing the vehicle, leaving it with the dealer and walking away from it, or selling it and trying to make a usually small profit.  Either way, unless you purchase the vehicle, you no longer have transportation.  The individual leases were originally begun as a means to move large amounts of inventory and bring LOTS of additional used vehicles back into the dealer market, which is where the bulk of the dealer profit is made.  Leasing will return again as soon as the market stabilizes in a year or so.  Anything that can be offered profitably will always be available.

Ron (Posted 07.31.08 10:35 PM ) Report Abuse

good insight Ron, you sound like you are in the car business.

keithgonzo@gmail.com (Posted 08.01.08 1:22 AM ) Report Abuse

@ Megan --  Gloating from PF bloggers?  

I drive a Scion xA that I could actually afford.   As far as I'm concerned, that was just a sound decision...  Could I have leased a Porsche?  Sure.  But that would've been a poor decision.

Now the automakers are guiding people to make better decisions.  That's a good thing -- it's preventing the shortsighted from overextending themselves.  You know, like you said, that's the whole reason we're in this mess!  :0)

brainy (Posted 08.01.08 5:40 AM ) Report Abuse

The recession/ soon to become a depression will punish all those over their head indebt. The fact banks are not willing to loan money to big car companies is telling of just how bad the credit crunch will get. IMO we should have/open debter prisons to punish all those who are in debt and can not pay. It's these right wing "i want a free lunch" people who have caused this recession/depression.

dan (Posted 08.01.08 7:07 AM ) Report Abuse

This economic crash will usher in the new depression. Money is tight and will be tighter. Car sales are going to drop as people can barely put gas in cars and food on the table. Many people can even keep their roof over their heads any longer and are simply walking away. The depression will be hard on many people.

tim (Posted 08.01.08 7:12 AM ) Report Abuse

I don't mind the gloating. It's no worse than the bragging a lot of the borrowers were doing within the past few years about the new, expensive purchases/cars/homes that they overextended themselves to get.

21 (Posted 08.01.08 8:23 AM ) Report Abuse

Megan you are correct "those evil banks and other lending institutions made us go into debt"  I had one banker hold a gun to my head and made me take out a loan.  Another held my family hostage until I finished the application.  I had no choice in the matter.  If you think I am talking down to you YES I AM.  What would Dave Ramsey say?

Hunter (Posted 08.01.08 8:30 AM ) Report Abuse

@ Hunter--you did not read me correctly. I did not say that banks "made" anyone go into debt. What I did say was that banks are certainly part of the problem.

Hopefully, this credit crisis will enlighten the average consumer about the potential dangers of using as much loan, mortgage, etc. as their banks approve for them.

And the gloating and pridefulness I was talking about? You, sir, have epitomized it with your sarcastic remarks.

Megan (Posted 08.01.08 9:50 AM ) Report Abuse

Megan-

I agree with "21" on this one.  For years all the bragging and gloating has been done by people who made poor financial decisions.  It's time for those who made good decisions to enjoy the fact they were right all along.  Personally I think it's better all around to accept a bad choice has been made and take steps to correct it even if someone else "gloating" is "salt in the wound".  It's tough, it may be humiliating but maybe they won't make the same mistake twice.  What's the other option? Bailing out stupid consumers?  Maybe banks share part of the blame but it's time for people to wake up and recognize their mistakes as well.  

"startsmart" (Posted 08.01.08 1:04 PM ) Report Abuse

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