GMAC to eliminate Canadian auto lease deals.

[FAPTurbo]

Link

GMAC Financial Services will no longer offer leasing-related incentives in Canada, the company announced Tuesday.

The change is in response to market conditions in Canada and recent steep drops in the residual values of used vehicles, said GMAC.

Gina Proia, a spokeswoman for the company, said Tuesday that the company will suspend incentivised lease offers starting next month.

Currently, buyers can get a 0.5 per cent lease rate on a Pontiac Montana or a Torrent SUV for up to four years.

GMAC will still continue to offer standard rate leases in Canada, Proia told The Associated Press.

Proia said no similar announcement has been made regarding GMAC leases in the United States.

The shift follows an announcement from Chrysler last week that its financial arm is getting out of the auto leasing business in the U.S. by August.

Chrysler Financial announced Friday it was working to renew a US$30 billion credit line with banks following a major drop in values for trucks and SUVs being returned at the end of lease terms.

U.S. dealers will still be able to offer leases to customers but they must use independent sources for financing.

Chrysler has vowed to boost incentives on the retail side to compensate for any loss in business.

Both Chrysler Financial and GMAC are owned by Cerberus Capital Management LP. The private equity firm holds an 80.1 per cent stake of Chrysler and a 51 per cent stake in GMAC.

Also last week, Ford announced its credit arm lost $2.1 billion in the second quarter because of the drop in residual values of leased trucks and SUVs.

With files from The Associated Press

[CARBIZ]

Perhaps in the grand scheme of things it won't matter a lot, but it is one more nail in the coffin for a lot of dealers. Although I can understand WHY GM is doing this, it will have long term consequences.

GM is shifting to 0/72 financing, which on many vehicles only makes a difference of $20-30 a month, although it shifts the burden to the consumer. I don't see how it really benefits GMAC, other than being able to 'control' their costs.

I took in a '05 Avalanche yesterday with a buy out of $22k, but the market value is more like $13k. Ouch. I think GMAC (or is it Cerebrus?) is over-reacting. If oil tumbles back to $100 a barrel (not completely unlikely) the truck market will recover. Chrysler was the first to ditch 3 year leases (in Canada) back in early 2000 when they started getting raped on incoming minivans that they had whored the crap out of; GM and Ford soon followed with 4 year leasing.

For the dealer, however, it will have potential consequences in 3-4 years when all the leases come due and there is nothing to replace them. We had a leasing 'hole' in 2003 when the 3 year leases that GMAC stopped pushing in 2000 were up and the 4 year leases were not due yet. It was an ugly year for a lot of dealers who were used to having that 30-40 unit portfolio flipping every month.

If more consumers start keeping their vehicles to the end of 72 months and beyond, total volumes will tumble worse, plus the high profit used car market is going to dry up: there won't be any more low mileage 3 and 4 year vehicles to flog.

Of course, GM is providing tons of perks NOW to put the right spin on it, but I have no doubt that once the hype has died down, those incentives will disappear.

(Reminds me of how Chev-Olds dealers were told that the GM-DAT product was going to compensate us for the loss of Oldsmobile, then P-B-GMC got the Wave anyway, the Epica turned out to be a dog and the Optra which did sell well is gone now anyway.) Nothing like replacing high profit vehicles like the Intrigue and Alero with the likes of the Aveo and Optra. Volume, yes; money, no.

Sorry, different rant.