Chrysler Returns to Leasing for 2010 Models

After a hiatus that covered the 2009 model year, Chrysler will return to leasing for all 2010 Chrysler, Dodge and Jeep vehicles. New 2009 vehicles still on dealer lots will get 0% financing for 72 months.

GMAC Financial is offering both the leasing and financing deals for Chrysler. The company discontinued the leasing program last summer when sky-high gas prices forced a shift in the car market and permanently injured the company, which eventually had to file for bankruptcy.

Chrysler’s lease deals go into effect Thursday.  

Resale Values for Chrysler Vehicles Fall

Not surprisingly, the resale values for Chrysler, Dodge and Jeep vehicles fell 6 percentage points following the automaker’s filing for Chapter 11, according to market research firm Automotive Lease Guide.

Before the bankruptcy filing, a three-year-old Chrysler had a resale value of 34.8%, a Jeep 38.4% and a Dodge would go for 37.3% of its original sale price. Now, those resale values have fallen to 28.8% for Chrysler, 32.4% for Jeep and 31.2% for Dodge.

Residual values affect the monthly payments of auto leases, so GMAC — now the main source of lending for Chrysler — will likely delay an increase in leasing. Also, consumers trading in Chryslers as part of their down payment for a new vehicle will get lower trade-in offers.

It’s also possible that smaller banks will ask for larger down payments from customers buying new Chryslers to cover the faster depreciation.

Resale Values Fall 6% for Chrysler Vehicles (Detroit Free Press)

Cars.com Offers Advice on Financing

Are you confused about whether you should lease, finance or pay cash for a new car? Maybe you’re just wondering what kind of financing is out there as the credit markets begin to unwind. Whatever your situation, check out Cars.com’s new Advice section on the advantages and disadvantages of different methods of paying for that new vehicle.

Car Financing Advice (Cars.com)

GMAC Eases Auto Lending Restrictions

GM’s financing arm announced an ease on credit restrictions and that it will waive certain dealer fees to allow more consumers to get auto loans. GMAC will make $5 billion available to the new pool of car buyers that it hopes will pump up severely depressed sales figures.

The elimination or suspension of certain fees placed on dealers will give dealers a break, but the implications go further for consumers. For the first time since the seizure of the credit markets in October 2008, potential car buyers with credit scores less than 620 will be eligible for lending from GMAC. The company also said it will cut certain rates for both new and used vehicles, but did not indicate by how much.

GM expects the move to increase the number of potential car buyers by 30%-35% for GM dealers who finance through GMAC — that’s about 70% of all GM dealers. The company said dealers would still use discretion in deciding to whom they will give loans, taking into account factors like job status and applicants’ financial records.

GMAC Expands Auto Lending to More Consumers (AP)

Credit Market Finds Relief from Government, Credit Unions

For financially-sound consumers, there’s really never been a better time to buy a car. The key is the credit market or, in other words, how to get a loan to finance a new-car purchase, discounted or not.

At the very least, signs of a loosening credit market have offered some hope. Credit unions have stepped up in a major way. As banks and the finance arms of automakers like GMAC rein in their lending, credit unions have become an excellent place for qualified buyers to find loans.

The government has made key moves to try to loosen auto credit, including lending $6.5 billion to Chrysler Financial and GMAC in December. The Fed also recently unveiled the Term Asset-Backed Securities Loan Facility program, which encourages investment in bundles of auto loans.

Military Can Get Discounted Loans Through Credit Union

Any member of the U.S. military can join the Navy Federal Credit Union, which recently committed $3.5 billion for auto loans to finance the purchase of new or used cars from any automaker.

This is tied to the Invest in America program, which gave credit union members across the country the opportunity to buy GM or Chrysler vehicles at discounted prices. GM offers 5% discounts along with $250 off the price of most vehicles, while Chrysler offers $500 and $1,000 discounts, depending on the vehicle.

Members of Navy Federal will have these deals on top of the low loan rates available through new-car loans. Navy Federal has 3 million members from the military and civilian personnel who work for the Department of Defense, and it says it remains on firmer financial ground because it hasn't made the risky investment mistakes that many banks have.

How Wall Street's Woes Affect Car Shoppers

Unless you have Bill Gates’ credit history — or you are Bill Gates — you may have trouble getting a loan to buy a car these days, dealers say.

It isn’t the price of gas that’s keeping people from buying cars, automakers say, it’s car shoppers’ inability to get loans that’s making them leave showrooms empty-handed. Dealers confirm that theory as well.

Credit is tight, and banks that are already treading water from carrying too many high-risk mortgages are shying away from adding to their woes by making auto loans.

When Lehman Brothers, a huge investment banker in business since before the Civil War, filed for bankruptcy Monday, the credit troubles were magnified.

Is an Extended Warranty Worth the Price?

A Consumer Reports survey cautions that despite the hype dealers give extended warranties, the added benefits probably aren’t worth the costs. According to the report, consumers paid out an average of $1,000 and saved only $700 in repairs.

The trick is that as vehicles have become more reliable, the likelihood that they will need extensive repairs for a "nightmare" scenario has decreased. Therefore, an extended warranty is insurance for a situation that will probably never occur, or — as Consumer Reports put it — it’s like betting against the house. The game is always rigged so the house reaps the reward because consumers tend to overestimate how much of a safety net they need.

Does this mean all extended warranties are bogus and trying to stay on the safe side is foolish? Of course not. In fact, there are probably plenty of car buyers out there who've had their behinds saved by an extended warranty. However, there are other options for emergency automotive repairs, such as putting the money you would have spent on the warranty into a mutual fund.

Let us know what your experiences have been with extended warranties. Will you buy one with your next car?

Extended Warranties: A High-Priced Gamble (Consumer Reports via The Consumerist) 

Car Loans Becoming Longer, Riskier

The sub-prime mortgage crisis may currently be the sexier story about ill-advised loans, but car and truck loans have become of increasing concern to consumers as well. Shockingly, 45% of car loans are for 6-year terms or longer, according to the Los Angeles Times.

The Times recently reported on the growing length and risk of loans financed for automobiles by banks, credit unions, and the dealers themselves. The report raises several issues that all car buyers (regardless of whether they’re looking for new or used) should be aware of.

The average length of a car loan has increased to five years and four months as of October (although a story on MSN puts the average closer to 6 years even). Dwindling are the days of the three-year loan, as consumers look to finance more expensive automobiles that they would otherwise be unable to afford. Buyers are trading off large amounts of interest for a lower monthly payment. Some credit unions are even offering car loans for as long as eight and nine years.

What happens when one of these owners goes to buy a new car? Dealers often roll the debt from their last car into the loan for their next car. If this new loan must be financed over another five, six or seven years to make it affordable, you can see how this could be a problem.

With 45% of car loans written for longer than six years, this means car buyers are increasingly attempting to finance more and more debt over longer periods of time—time during which the product they’ve bought has plummeted in value.  Today’s average car owner owes $4,221 more than the vehicle is worth by the time he or she sells it, up more than $500 from 2002.

New cars that are fully loaded—with debt (Los Angeles Times)

Should Car Loans Differ By Make?

A recent study points to high loan default rates on domestic makes as a reason for changing loan rates depending on the logo on the grille. The study comes from Penn State’s College of Business, and it studied the performance of nearly 7,000 car loans between 1998 and 2003. The results were pretty clear. Those getting a loan for a Japanese car were 56% less likely to default on the loan than those buying domestics. Those buying European nameplates were 50% less likely to default than their domestic counterparts.

These results led researchers to suggest domestic automakers raise their prices to compensate for the rate of loan defaults. Somehow we don’t think that’s going to happen. Besides this new twist on loan dynamics, the study found that tried and true measures like high credit scores and high salaries lead to fewer defaults on loans. Other tidbits from the study can be found below.

Study: Auto Loans For American-Made Cars More Likely To Default (SMEAL College of Business Via Autotopia)