Chrysler’s Leasing Crutch

With three months of more cautious leasing under its belt after a yearlong hiatus, Chrysler is ready to step up its efforts. The goal: to have leasing generate 10% of sales in the next six to eight months, up from 7% of sales now.

Using November sales as an example, Chrysler is aiming for 6,356 leases by 3Q10, compared with 4,449 currently. That’s an increase of 43%, which seems pretty aggressive to me.

Chrysler vehicle sales have been battered this year, plunging 25% in November alone. The OEM hopes that “increased” lease offers, combined with model upgrades, will get sales back on track. But does Chrysler really want a 43% boost in lease volume? I’m not so sure.

Tags: chrysler, lease

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Comment by Chuck Smith on December 29, 2009 at 1:19pm: I bet they are using inflated residual values to try and move vehicles??? Are they betting on the future to get them through the present crisis?? As you watch Chrysler try and "Brand" their different product lines, it is becoming clear that they are counting on "Ram" trucks to be a big part of the future. They still have a long way to go and it is not even certain that Chrysler will make it. Something has to change rather quickly to pull them out of their downward sales spiral!!!

Comment by Adam M. Berger on December 29, 2009 at 6:50pm: Little can be said about this other than - history repeats itself! The subsidized lease programs and inadeqate, err, wholly overlooked financial reserves for residual losses will again be overlooked in favor of propping up sales and delaying the effects for a later date and time when, of course, things will be so much better no one will notice the few skeletons in the closet from "those bad leases we wrote." Simple leasing - based on real depreciation expectations - should prove itself useful to those that need it.

It appears this is all driven by a goal to increase sales. If they want to prop up sales, just offer a loyalty rebate, low interest financing, a bigger rebate. Why must Chrysler use a product as fundamentally simple as leasing and adulterate it so?

Comment by Marcie Belles on December 30, 2009 at 12:03pm: Which tends to have a more detrimental effect on a lender: unrealistic residuals or overly aggressive incentives?

Comment by Chuck Smith on January 4, 2010 at 7:41pm: Unrealistic Residuals! The problem is the damage is done today and not realized for 24 to 36 months. By then all the people who were responsible for the aggressive residuals have taken their "production bonuses" and moved on. Chrysler cannot afford to "kick the can" further down the street in hopes it will disappear.

Comment by Marcie Belles on January 14, 2010 at 1:16pm: GM has joined the fray...

GM CEO Ed Whitacre said earlier this week that leasing for the Cadillac brand is "loosening up," which is expected to give the luxury brand a boost.

“We’ll just do more of it," he said at the Detroit Auto Show without getting into specifics.

Dare I say it? Here we go again...