GMAC to end subsidized vehicle leasing
Zero per cent interest rate availability is draped on the side of an unsold 2008 Denali at a GMC Truck dealership in Littleton, Colo.. in July. (David Zalubowski/Associated Press)
GMAC Financial Services announced Monday that it will end subsidized forms of vehicle leasing beginning Friday.
North America's largest auto lender, which is owned by General Motors Corp. and Cerberus Capital Management LP, will stop offering lease deals that carry an incentive or discount but will instead offer one standard lease rate for all cars and trucks, company spokeswoman Gina Proia said.
The move comes at a time when many automakers and their financing companies are losing money on leases because of the sharp decline in resale values of leased vehicles, such as trucks and SUVs, in the face of record gas prices. GMAC's decision also comes on the heels of last week's announcement by Chrysler Financial to exit the leasing business altogether as of Friday.
Automakers have been subsidizing lease rates in the past to keep monthly payments as low as possible in order to attract consumers, Scotia Capital analyst Carlos Gomes told CBC News. More than 40 per cent of all vehicles are lease-financed in Canada, he said.
But consumers are walking away from their vehicles when the typical three-year lease period is over, and automakers are left with cars and trucks that are worth less on the market, he said.
"Manufacturers are taking losses on these vehicles that are coming back from leases," Gomes said.
It's a problem that automakers are facing both in Canada and the United States, he said.
Vehicle prices, in particular for SUVs and trucks, have declined 25 per cent to 30 per cent because of the large increase in gas prices over the past year or so, Gomes said.
"People are really shifting their preference from the bigger gas guzzlers to small, fuel-efficient vehicles," he said. "So manufacturers that rely on these vehicles are having the biggest difficulty.
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