Chrysler to Stop Leasing Cars; What it Means

Chrysler — the automaker company that includes the Chrysler, Jeep and Dodge brands — will stop offering leases to customers as of Aug. 1. Chrysler, Jeep and Dodge dealers, however, will still be able to offer leases financed through third parties, like banking institutions.

Depending on how determined the dealer is to make a third party lease seamless to the customer, you might not notice the difference from a purchasing perspective. However, don't expect every dealer to offer similar deals. Without Chrysler's financial arm backing leases, offers will differ from one dealer to another, which could cause confusion for shoppers.

From an industry perspective, this is very bad news for Chrysler and its dealers. The company basically is unable to get credit to back leases based on the predicted value — or residual value — of its products when the leases end. Lease payments are supposed to pay for the car's depreciation, but the banks don't trust that a 3-year-old Chrysler will be worth enough at the end of the lease. As a result, either the bank would be stuck with a low-value asset at lease end, or the depreciation written into the lease contract would be so great that the payments would be unattractive to consumers. Chrysler's new president, Jim Press, says there is no longer a financial incentive for buyers to lease over purchasing. That may be true, for Chrysler products. But high residual vehicles from luxury automakers and Japanese brands like Honda and Toyota still equate to lower monthly payments than purchasing and still hold allure for many buyers. 

Chrysler dealers say lease clients are often preferred because they can count on them returning in two to three years, versus buyers opting for five- to six-year financing. 

Cars.com senior editor Joe Wiesenfelder sees the move as understandable but still dire.

"This will likely hurt Chrysler on two levels," he said. "Leasing is how many people are getting out of their gas-guzzlers now, paying off their financing commitment through lower monthly payments. People in this position may be driven to brands with more available lease deals. Beyond that, it's just a bad sign; it says to consumers that the company doesn't expect its own products to retain their value. If other automakers follow suit, it will blunt the impact, but if they don't, this could be very damaging to Chrysler in the long run."

Chrysler to quit leasing business (Detroit News)

Comments

[David]

Great so I guess my worthless Jeep will be worth less soon!!!

[DonB]

There is another reason for leasing cars - in some professions, lease payments are tax-deductible as an expense. It's unlikely that realtors, for instance will purchase a Chrysler when their lease payments on any other make are deductible. And there are a lot of realtors, salespeople, etc. who lease cars! Chrysler is giving lots of people (customers) the kiss-off!!

[Amuro Ray]

Joe hit it right in the nail!

Chrylser to any customers - potential or current - our products don't worth much after just 3 years!

Good luck to those who are trying to sell theirs now - especially private sellers! :(

P.S. Knowing that the products worth like squart after 3 years, I wonder who are willing to make the purchase now?

[Tony]

Who gives a .... if Chrysler disappears alltogether?
Their product is trash. So some ... people will buy Ford or GM instead.
The workers will move on to the Toyota or Honda factories.

Leases have made less and less sense for years. The financing vs. lease on Chrysler products has been less than about $30 bucks a month for years. If you ever want to find out what the dealers think of their product try and swap one at the end of the lease period. They know all the parts they can get you to pay for that they can stick you under "not normal wear and tear" and not covered under the drive train warranty. They also use their service records against you if you don't pay tripple for oil changes from the dealer and do them right on time.

I too am the owner of a rapidly depreciating jeep whos rear window just fell down into the door jamming the back door shut over the weekend.

I also had a "warrenty emissions system problem" that cost me $600 dollars. I had my mechanic check it and preform 2 tests and told me it was the vacuum pump. He told me to take it to the dealer to fix it and it should be free. I had him mark it with a dot of nail polish. I took it to the dealer and stayed there with it. I sat there 3 hours watching the car not move in the back lot. While it was sitting there I asked them about why I was still waiting and they said they were waiting for the 3rd test machine that they said they was waiting on. Not only did they charge me for 3 hours labor and said they did all 3 tests they said it was $6 worth of vacuum hose and not covered. The guy that checked it in was no where to be found and the manager was bullying me to pay up.

I took it back to ny mechanic and they did swap the vacuum pump. I should have took pictures but I doubt that it would help, I bet they do this at least 6 times a day. I've had other experences like this with other dealers and some involving safety recalls.

I've been complaining about a transmission problem since day one and I feel they were playing with me until the warranty wears out. The only concen I'm getting from them is the fact that I'm not driving it enough to get it out of warranty early enough to save them a replacement transmission. They don't know that I've been looking over their shoulder reading the notes when they bring up the service record of my car.

[J]

Press, why did you leave your nice paying job named Toyota to a sinking boat?

[AV]

sounds like Chrystler is trying to slowly kill itself so that (rising) GM, Toyota, Honda, or Ford can just pcik them up as an after-deal.

Don B, why would any one of those professions you listed stop leasing a Chrysler? Chrysler Credit got out of the leasing game...not the banks.... you can still lease a Chrysler product through a 3rd party institution... and wouldnt it still be deductible through a bank?

[Infosaur]

I had a 98 Stratus and loved it.

But I couldn't get squat for a trade in, not even at a Chrysler shop!

Next time I buy a Dodge (helloooo Magnum!) it will be after depreciation. I might get a 2011 Challenger SE (with the new V-6 engine rummored to come out in 2010) but not untill 2015.