SUV resale value drops on poor sales
As the price of gas spikes up, the value of SUVs and pickup trucks has plummeted. That's a big problem for companies that leased these vehicles two or three years ago. Janet Babin reports on what car companies could lose.
SUVs and trucks sit on a lot waiting for buyers in Norwalk, Connecticut. Higher fuel prices have led to a steep decline in SUV sales across the country. (Spencer Platt/Getty Images)
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Scott Jagow: Car companies have decided leasing is a bad proposition. GMAC and Ford are both cutting back on auto leases. Chrysler has stopped them outright. Marketplace's Janet Babin has more from North Carolina Public Radio.
Janet Babin: As the price of gas spikes up, the value of SUVs and pickup trucks has plummeted. That's a big problem for companies that leased these vehicles two or three years ago. They won't make nearly as much money selling the SUV or truck when that lease is up. Resale values on some trucks have dropped more than 30 percent over the last year.
Brendan Moore runs the Web site autosavant.net. He says the losses for leasing companies are piling up:
Brendan Moore: You can do the math pretty quick, say $3,000 per vehicle, extrapolated over, you know, a million vehicles coming off lease, and you could see where they would lose a lot of money very quickly.
Ford took a $1.8 billion charge last quarter because of those lower resale values. Tight credit will also make leasing tougher. One bright side though: Moore says companies that leased fuel efficient cars are poised to make profits they didn't likely expect.
I'm Janet Babin for Marketplace.
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07/30/2008
I returned my Volvo XC90 yesterday (two years lease due). However, Volvo Finance never offered me a buy back. I would consider if they offer me. They are not really good in business sense. No wonder that they have to take a lost.
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