Anyone Leasing Their Mustang?

from a report in the Dedtroit News:

"Automotive leasing, which once accounted for nearly a third of the market, will become more expensive, difficult, and rare as banks and automakers scale back on the practice.

Chase Auto Finance, among the leading lease lenders not owned by an automaker, notified dealers this week that the bank will not finance Chrysler leases. The announcement comes days after Chrysler Financial, the Auburn Hills automaker's lending arm, said it would exit the leasing business beginning Friday.
Also, dealers said GMAC LLC is tightening credit standards for lessors. GMAC, jointly owned by General Motors Corp. and Cerberus Capital Management LP, stopped leasing altogether in Canada.

Ford Motor Co. would not confirm nor deny reports that it is raising lease prices on certain trucks and SUVs to the point where leasing is impractical, but the automaker said it adjusts its residual values based on market conditions. A Toyota Motor Corp. spokesman said there is no change in its leasing strategy.
Automakers' finance arms are exiting or pulling back on leasing because they are having an increasingly difficult time selling vehicles coming off leases, particularly SUVs. That pushes down their trade-in, or residual, values, which means automakers lose money when they try to resell the used vehicles at auction.
If automakers don't offer leases, or offer less attractive deals, on trucks and SUVs it could cause those plummeting segments to dive even deeper, said John Blair, CEO of the Automotive Lease Guide in Santa Barbara, Calif. The guide tracks vehicles' residual values for automakers and dealers.

That will put additional pressure on what's already the worse automotive market in 15 years. Through June, industry sales are down 10 percent, while sales of light trucks and SUV's are down 18 percent compared with a year ago, according to Autodata Corp.

It's unlikely that banks will fill the void because they also want to limit exposure to falling residual volumes, Blair said.

"The Chase action tells you the banks will not be willing to pick up all the slack from Chrysler's withdrawal," he said. And the price for consumers who do lease through banks is likely to increase as banks won't offer the same incentives on leases that automakers do in hopes of boosting sales.

About 20 percent of all new vehicles are leased -- down from a peak of more than 30 percent in the late 1980s. But the leasing percentage is much higher for more expensive vehicles such as SUVs and luxury cars, Blair said.

Fitch Ratings downgraded Chrysler's debt Tuesday deeper into debt status, citing the automaker's difficulty obtaining financing for its vehicles and potential volume declines related to no longer offering leases.

The problem of falling residual values could cause leasing to dip to even a lower rate in the near future, but Blair said he doesn't anticipate Ford or GM to follow Chrysler's lead because ending leasing "would shut off the sales channels for their Lincoln, Cadillac brands." Those nameplates lease upward of 75 percent of their new vehicles.

Chase Auto Finance, a unit of JPMorgan Chase & Co., will stop leasing Chrysler vehicles because it is concerned that it might be flooded with lease financing requests from dealers, said Chase spokeswoman Mary Kay Bean.
"Leasing is a small part of our portfolio and we intend to keep it that way," she said.

Chase will continue lease financing for all other automakers' dealers and writing loans for sales with Chrysler's dealers. Many other lending institutions, including Comerica Bank and Bank of America don't offer leasing to any automakers.
Others, including Fifth Third Bank, will continue to offer leasing. Those options are especially important in Metro Detroit where some dealers lease up to 90 percent of the vehicles they sell.

Bill Golling said his Golling Chrysler Jeep Dodge store in Bloomfield Hills has been buzzing this week as customers rush to beat Friday's lease deadline. He said he's sold 140 vehicles in the past two day, most of those leases.

"Leasing has been a huge part of our business, but if retail purchasing becomes essentially the same monthly payment, it might be a viable replacement," he said. Golling said he doesn't currently lease with any banks besides Chrysler Financial but is looking for alternatives.

GMAC notified dealers that it will stop leasing to consumers with the lowest credit ratings, said Dick Genthe, president of Dick Genthe Chevrolet in Southgate. A GM spokeswoman had no comment on the automaker's leasing practices. GMAC officials confirmed this week that it will stop leasing in Canada.

Genthe said the credit ratings action will not adversely impact his dealership. In fact, he thinks Chevrolet could pick up business. "Now we have all these Chrysler folks coming out of leases and if they want to lease ... hopefully we'll get the lion's share," he said.

Ford regularly adjusts its lease residual values based on market conditions but is committed to leasing, said Brenda Hines, spokeswoman for Ford Credit.

"Leasing will always be part of our business plan," she said.

Last week, Ford Credit took a $2.1 billion charge because of the drop in the residual value of leased vehicles. Other automakers, including Toyota, BMW AG and Honda Motor Co. have also written down residual values this year.
Automakers will continue to pull back on incentives for leases -- something that could make it more difficult to sell vehicles in a market already depressed by high gas prices and a struggling economy, said Earl Hesterberg, president and CEO of Group 1 Automotive, which owns 100 dealerships.

"I think (leasing) became the incentive tactic of choice and that got things out of balance," he said in a conference call with analysts.

Hesterberg said Chrysler's move was unexpected and he doesn't expect others to follow.

"It's ... psychologically damaging because there is a lease market out there," he said. "This trend is not unexpected. I tell you it was unexpected that somebody totally withdrew from leasing vehicles."

The 09's are allready out, I saw an 09 black GT with the new roof at my dealer yesterday when I was getting the oil changed in the fusion. They also had some 09 escapes with the new 2.5 duratec 4 cylinder, it now has 171 hp and 171 foot pounds. Not bad for a 4 banger.

Here is a sample comparison between leasing and financing... We'll use a $28k purchase price (forget taxes) with $3k down for both scenarios.

On a 25k loan @ 5% for 60 months, you end up paying over $3300 in interest. Each percentage point up or down changes that figure by approximately $600. Your car is worth less than half of what you paid for it (KBB value of a 2003 GT Coupe is a bit over $11k for private party sale - Average dealer price including Mach 1's and Cobras is under $16k). You paid a total of $31,300 over 5 years and have about $14k in equity, meaning it cost you approximately $17k over 5 years if you sold the car immediately. This equates to $3,400/year or $283/month. Your actualy monthly financial outlay, however is about $470/month. You'll also have to factor in repair costs for the two years it is out of warranty, and potentially the cost of replacing the tires. My dad used to lease and never replaced a set of tires once, but thats very dependant on the driver. Obviously if you keep the car longer, the real monthly costs go down since you are no longer making payments.

Ford's estimated lease price on a 2008 GT Coupe in the above scenario (this doesn't take into account the incentives) is $376/month. Over 3 years, you will have spent $16,536. This equates to approximately $5,500/year or $460/month. You'll never have to worry about repair costs (and if you are careful, tires), but you do have to worry about going over the mileage. For some people like me, 12,000 miles/year is more than I could drive. For people like Kooldawg, however, its not even remotely close.

So decide: It costs you less each month to lease, but the effective cost in the end makes it about $180/month more expensive to lease than to buy. Is it worth it to you to spend the extra money to never worry about repairs and to always be driving a pretty new vehicle?

For me one factor says it all: modifications. (Even though I haven't done anything.)


EDIT: If you finance your car and sell it in three years, it ends up costing you approximately $5k/year or $416/month, assuming you can sell the car for 60% of its original purchase price. Keeping it two years is about $510/month.

The 2009's are all over the rental car fleet already.