Automakers scaling back on leases
The Big Three automakers are giving their leasing practices an overhaul after getting slammed with losses by falling SUV and truck resale values. Dan Grech reports.
Ford trucks at a dealership in Hudson, Wisconsin. (Karen Bleier/AFP/Getty Images)
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Kai Ryssdal: There's more information today about exactly how small General Motors is going to get as it tries to shave billions in costs. GM said reports the company will cut about 15 percent of its white collar workforce are generally accurate.
If you've got a hankering for a good old American-built truck or SUV, you'd better plan on buying one because the Big Three are scaling way back on leases, leases that used to make them a whole bunch of money. High gas prices and the tight credit market have flipped the economics of auto leasing upside down, as Marketplace's Dan Grech reports.
Dan Grech: Thanks to leasing, millions of Americans are driving newer, more expensive vehicles than they could afford to buy. Automakers have benefited too. Leases help move new trucks and SUVs, which are more profitable than smaller cars. Among the Big Three, one in five new vehicles is leased.
That era is ending. Ford and GM this week are scaling back leases. Chrysler has ended them altogether. The reason: expensive gas has destroyed the resale value of gas guzzlers.
Brendan Moore runs the website autosavant.net.
Brendan Moore: So that Cadillac Escalade is not worth 50 percent when it's coming off lease, it's worth more like, say, 26 percent. Big, big problem. You extrapolate this across several million vehicles and you're looking at billions of dollars of losses.
Before $4 a gallon gas, trucks and SUVs were one of the few bright spots for U.S. automakers. But John Blair with Automotive Lease Guide says big cars' days may be numbered, leases or not.
John Blair: Would you be willing to pay $300 or $400 a month more to have that luxury? I think it's a pretty easy decision for most consumers. I think they're gonna say, "You know what? I will figure out a way to get my skis to the mountain in some other fashion."
Chrysler hopes to hang onto its old leasing customers with a new math. It plans to offer 72-month loans for new vehicles. The monthly payments will be the same as those on a three year lease.
I'm Dan Grech for Marketplace.
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