It seems suicidal in the long run, but Chrysler’s decision to suspend leasing kicked up a huge number of end-of-month sales. Chrysler dealers say showroom traffic and sales have soared in recent days, with nearly 100% of transactions done with leases. Dealerships are flooding local newspapers with ads and some are staying open until midnight as they try and squeeze in as many lease deals as possible.
Chrysler announced 7/25 it would no longer offer leases as of 8/1, a dramatic move made necessary by the steep declines in residual values of pickup trucks and SUVs in recent months.
Golling Chrysler Jeep Dodge in metro Detroit more than tripled its business, selling 112 vehicles last Monday and 96 on Tuesday, owner Bill Golling told Dow Jones. The majority of sales were through leasing.
However, going forward, Chrysler may suffer even bigger losses, as many consumers opt for leases for a number of reasons. Those folks will likely just go elsewhere. A huge chunk of dealer volumes is done via leasing. We wonder if it also has to do with Chrysler Financial’s creditworthiness, as one media exec in the business speculated to us. According to a Detroit free Press article, Chrysler Financial is working to refinance a big chunk of its working capital.
An AP story also mentioned Chase Auto Finance says it will stop financing leases for Chrysler vehicles. The unit of JPMorgan Chase & Co. will continue to make loans for retail sales with Chrysler’s dealers, but it will no longer offer leases on Chrysler, Dodge or Jeep products.
The story said Chase wants to keep its lease portfolio small because it is concerned about declining used car values. The bank will continue financing leases for other automakers.