General Motors's recent sales woes can be attributed to many factors, but one of the biggest reasons undoubtedly is its withdrawal from the leasing business. Now that it has waded through bankruptcy and residual values of its vehicles are on the rise, GM may tiptoe back into the leasing market as early as next month.
Although the details are still reportedly being ironed out, GM spokesman Pete Ternes told The Wall Street Journal that the automaker has been studying ways to get back into leasing, and it could happen by August. GM Sales Chief Mark LaNeve said in February the automaker was looking at leasing again in 2009.
GMAC, GM's financing affiliate, is likely to resume leasing next month. Gina Proia, a spokeswoman from the company, said GMAC "continues to evaluate ways to support" the auto industry and "leasing is one of the options we are evaluating." GM now owns just 9.9 percent of GMAC, after selling 51 percent to Cerberus Capital Management in 2006, and relinquishing 40 percent last December. GMAC was given bank holding status by the federal government so that it could receive funds from the U.S. Treasury's Troubled Asset Relief Program (TARP).
GM initially stopped leasing vehicles to customers because the resale values of its cars and trucks tanked. Low resale values forced GM to re-lease vehicles for much less than they expected, leading to its withdrawal from the leasing market altogether. Nearly 25 percent of GM's business in the first half of 2008 stemmed from leases.
Whenever it should jumpstart its leasing program, the General is likely to only offer the option of specific vehicle models, especially luxury cars. Likely candidates include the Cadillac CTS and the new 2010 Buick LaCrosse. The luxury auto business is highly dependent on leases, as can be seen from Cadillac's U.S. sales decline of 41 percent in the first half of 2009.
Ternes said leasing will probably never be as big a part of GM's business plan as it was before it stopped the practice last August.
"We're looking at it very seriously, but it's not set yet," he said. "We've got to look at what vehicles we would offer it on."
Source: Automotive News, Bloomberg, The Wall Street Journal