Chrysler is looking to get back into the consumer leasing space after a one-year hiatus. GMAC, which returned to leasing last month, would underwrite Chrysler’s leases.
I understand that leasing is an important financing tool for OEMs — if they want to be able to sell vehicles, their customers must be able to afford them. And leasing often provides that accessibility.
But leasing has proven over the years to be a thorn in the OEMs’ side, and I fear that this move would put these financiers on track for some heavy losses — again.
In a Wall Street Journal article today, a dealer apprised of the Chrysler situation said: “There will be some form of leasing where the residuals are right and the manufacturer isn’t saddled with huge losses,” the dealer said.
Sure, that’s the idea behind leasing, but to be able to control whether residuals are “right” and the manufacturer won’t lose money is nearly impossible. In my mind, there’s a tradeoff that needs to be considered: How much will Chrysler lose in sales if it doesn’t offer leasing versus how much might it lose in residual losses? If history is any indication, the OEM might want to hold off on its lease return.
