Oct 14, 2008 6:44 pm US/Central
Car Dealers To Cut Back On Leasing Cars
CHICAGO (CBS) ―
The credit crunch is now affecting car leases. Leasing used to be the easy way to get new wheels without the commitment, but as CBS 2's Mai Martinez reports many major car makers are cutting back or doing away with leases completely.
Good luck trying to lease a car. The U.S. financial crisis has banks tightening their purse strings and car makers looking for better ways to make money. Car dealers say the profits from leased cars come from their sale after a lease expires, and these days, that's not much. In fact, many dealers and manufacturers end up having to cover losses.
"A lot of the banks that were doing leasing, that were heavily involved in leasing, have taken a couple of steps back from that, and starting to reanalyze things," said J.C. Prats, Z Frank Kia.
"You're hedging your bets two to three years down the road that a car is going to be worth a certain amount, comes that time it's not," said Phil Johnson, Napleton's Chrysler Jeep Dodge.
That's why companies like GM and Ford are cutting back on, or raising lease prices on vehicles. Chrysler's financial department stopped offering leases altogether this summer.
Still some dealerships say it's not as bad on the local level.
"Because we do so much business with so many different banks, none of the banks that we use have dropped out of the game," Prats said. "They're all still lending money to the customers."
There is one bright side to this financing crunch. Dealers are very eager to sell the cars they have. So eager, in fact, that some customers are surprised.
"Seems like they're dying to get a deal," said George Fotiadis, car customer.
"The price that he gave me was substantially lower than the sticker that was on the windows," said Betty Howard, car customer.
Dealers say until the market bounces back, there's only one thing they can do.
"Let's just keep plugging away and trying and we'll do our best," Johnson said.
If you can't get financing or a lease on a new car, car dealers recommend opting for used cars, or less expensive brand cars, like Kia. Both options can be thousands of dollars cheaper, and therefore easier to qualify for financing.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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