No More Leasing Cars?

in Automobile

Leasing Cars a Thing of the Past?

I have commented previously about why I do not lease cars, and it is mostly because it becomes cyclic and you never have your debt paid off, because you end up getting a new leased car.

It seems our firends and General Motors agree with my view on this. This is not actually true, but as of August 1, you will not be able to lease a GM car from GM any more (I am sure there will be leasing companies out there somewhere, but not directly from GM), instead GM will offer you a 6 year ZERO-Interest loan to take their car home with you.

Why? Resale value of Vans, SUVs (or is that SUKs?), and other monster gas guzzlers is such that leasing has actually become a money losing concept for GM (or someone has figured out it soon will be).  Interesting to see if other large North American car makers will follow suit or not, but the only problem with a GM Lease OR zero-interest loan is, that at the end of it, you still have a GM vehicle (speaking as the owner of a Montana VAN).

Evidently Chrysler in the U.S. is also following suit and will be withdrawing from the Leasing business as well.

Right now, I have to pay off my used Toyota Carolla, but that is about it. I drive cars until they are DEAD and then wait 6 more months after that, so leasing never made a lot of sense to me (I used to drive a 12 year old ’72 Dodge Dart with black vinyl interior, so no, my car is not an extension of me (or maybe it is)). I am not sad to see leasing, go the way of the “Great Awk”.

Is anyone upset that they won’t be able to lease directly from the manufacturer any more?

{ 2 comments }

  • Jean July 31, 2008, 9:34 PM

    It’s a sad state when the whole auto financing analysis dialogue is not about the amount of total loan interest paid or the depreciated value of the car, but rather about cash flow out of your monthly paycheck. That has absolutely no relevance to the economic fundamentals of a good deal. Once you start playing the cash flow fiddle, the car salesman has you by the balls and it’s all downhill upselling from there. And 72 month amortizations? How long until we see 25-year car mortgages guaranteed by the CMHC?

    When the BoC & FRB lowered interest rates to 50-year lows in 2004, the automakers followed suit with the 0% and 0.9% gimmick as a way to stimulate demand. Subsidized car loans evolved into a consumer expectation as a car shopping norm. So automakers continue to offer low interest loans as a gimmick, although the true cost of the interest is hidden in the price of a new car, which has increased substantially since 2004.

    Nevertheless, cross-border shopping has induced numerous manufacturers to offer a slight cash purchase discounts to keep cash buyers in Canada. But that action reveals that “0% interest” is not really a loss-making loan, but rather a car that has the true cost of interest already padded into its base price. Hence, the consumer loses out because there’s an imputed loan interest cost in the base price of the car — which cash buyers only see a partial offset of.

    Save yourself grief. Follow the Lemon-Aid book suggestion and buy a 2 year old vehicle, pay cash, and drive it into the ground. Death to leasing!

    Reply
  • Gene July 30, 2008, 10:12 AM

    Dave Ramsey talks a lot about the auto “fleece”. He talks about what a rip off they are, which is why, traditionally, dealerships have pushed leases.

    There was a news item on CBC last night saying that leases are popular because the payment can be $100 cheaper per month: say $271 vs $371. Makes sense, since after the lease is up, you own nothing, after the car loan is up, you own a vehicle!

    Reply

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