The lack of available leasing appears to be trumping vehicle quality when it comes to spurring new-car sales at GM’s Cadillac.
The WSJ:
General Motors Co.’s Cadillac division is rolling out new models and a fresh advertising campaign to stem a deep decline in sales, but it may not be able to make up much ground until the car maker gets back into the leasing business.
More than any other GM brand, Cadillac has been hurt by the company’s decision last summer to back away from the leasing business, which is a key driver of sales of luxury vehicles. Since then, Cadillac has steadily ceded market share even as it has scrambled to boost incentives.
Just 6% of Cadillac customers in August got leases. So far this year, Cadillac sales have fallen 47%, and its market share is 0.9%, down a half a point from 2007.
Just 6% of Cadillac customers in August leased a vehicle as opposed to buying one, according to Edmunds.com. That compares to 32% of customers taking the lease option at the five import luxury brands that Cadillac competes with: Mercedes, BMW, Lexus, Audi and Acura.
GMAC has helped GM by returning to leasing last month, but according to published reports, “that effort got off to a very slow start in August, partially because the leases didn’t offer as favorable terms as those offered by competing car brands.”
While leasing is still mostly on hiatus due to a lack of both capital and appetite for risk, there are numerous credit unions around the country offering a balloon payment programs with sensible residuals insured by RVI and Wesco.
Leasing offers depreciation opportunities for “for profit” lenders. Since credit unions are “non profit” balloon financing makes a lot of sense. As the title is in the name of the customer’s name, insurance costs somewhat less than a lease. The sales/use tax advantage/disadvantage varies from state to state.
Credit unions are not dependent on the ABS market and most have money to lend. The program, called Driving Sense, is available to eligible credit unions through Auto Financial Group from Houston TX. The program enables participating credit unions the opportunity to offer a program that produces substantial revenue for the credit union, while shortening the term and lowering the monthly payment for consumers. Many of these credit unions offer indirect programs through auto dealers.