LLC’s finance arm will get out of the leasing business effective Aug. 1.
Financial will focus on supporting purchase customers, who comprise 80% of the market.
“We’ll have the very best purchase incentive that we’ve had in a long time,” promises Jim Press, the auto maker’s vice chairman and co-president. “We’re focusing on the 80% of the market that retail finances vs. the 20% that’s leased.”
Details of buyer programs will be revealed after Aug. 1, says Steven Landry, executive vice president-North American sales.
Meanwhile, Chrysler dealers can continue to offer leasing through independent sources, Press says. But the auto maker’s exit is prompted by a reversal in the market conditions that made such deals attractive in the past.
“The cost of funds was low, banks had a good appetite to buy those contracts, residual values were pretty good and fairly stable,” Press tells journalists and analysts during a teleconference. “The economic advantages of leasing have really disappeared.”
Trade-in cycles for buying and leasing are closely parallel at 39 months and 36 months, respectively, Press says.
He concedes there will be some impact on Chrysler’s sales volume, but looking at the big picture, he adds: “It will help stimulate the economy and help our customers buy vehicles.”
Says Landry: “We’re really going to push the (message): ‘Why lease when you can own?’”
Press suggests Chrysler’s approach will lead to greater economic stability for the auto maker and its dealers.
“A lot of leasing was used to try to bring people into products who probably shouldn’t have been in leasing,” he says. “That kind of exposure is kind of a bubble.”
Reaction to the change in strategy was muted.
“Too early to say,” says a dealer in Bellville, NJ. “We don’t know what programs might be replacing it, but we’ve been told there will be a replacement. So if you’ve got a monthly lease payment of $350, you could expect a commensurate payment under a different program.”
A man who answered the phone at Automotive Lease Guide says he expects other lenders will fill any voids left by Chrysler Financial’s exit. But future applications will be more closely scrutinized and lease values may decline, he warns.
The Jeep Liberty and Jeep Grand Cherokee SUVs are the Chrysler vehicles most commonly associated with leasing, Landry says.