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Home : Top Stories : GMAC to eliminate Canadian auto lease deals

GMAC to eliminate Canadian auto lease deals

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CTV News: Scott Laurie on why leases were cut
CTV Toronto: Roger Petersen on how the economic squeeze brought an end to GM leasing
CTV Montreal: Paul Karwatsky on how the lease decision will affect buyers
CTV Newsnet: Mohamed Bouchama, Car Help Canada, on whether other companies could follow GM

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CTV.ca News Staff

Date: Tue. Jul. 29 2008 10:21 PM ET

The finance arm of General Motors Corp. announced Tuesday it will no longer offer leasing-related incentives in Canada, in what could be a major blow to car dealerships.

GMAC Financial Services said the change is in response to market conditions in Canada and recent steep drops in the residual values of used vehicles.

Stew Low, spokesperson for GM Canada, said the company will suspend incentivised lease offers starting next month.

"If the rates won't be subsidized, so when you compare them to a finance payment they won't be as competitive, we think most people will choose a financing option," he told CTV News.

Currently, buyers can get a 0.5 per cent lease rate on a Pontiac Montana or a Torrent SUV for up to four years.

GMAC will still continue to offer standard rate leases in Canada, Proia told The Associated Press.

Proia said no similar announcement has been made regarding GMAC leases in the United States.

The shift follows an announcement from Chrysler last week that its financial arm is getting out of the auto leasing business in the U.S. by August.

Chrysler Financial announced Friday it was working to renew a US$30 billion credit line with banks following a major drop in values for trucks and SUVs being returned at the end of lease terms.

Car dealer Mike Carmichael said he was concerned what GM's decision would mean to his customers. It's estimated that leasing makes up for 40 per cent of dealer business.

"We're a little unsure as to how the market is going to react," he said.

U.S. dealers will still be able to offer leases to customers but they must use independent sources for financing.

Chrysler has vowed to boost incentives on the retail side to compensate for any loss in business.

Both Chrysler Financial and GMAC are owned by Cerberus Capital Management LP. The private equity firm holds an 80.1 per cent stake of Chrysler and a 51 per cent stake in GMAC.

Also last week, Ford announced its credit arm lost $2.1 billion in the second quarter because of the drop in residual values of leased trucks and SUVs.

With a report by CTV's Scott Laurie and files from The Associated Press

Comments are now closed for this story

Gregory Boudreau
said

I seems to me if you want to try and move vehicles, you have to try and offer as much incentives as you can, the alterative is having vehicles just sitting around.


Matt Davis
said

I heard that the other side of this is that they'll now be offering low or no interest loans for up to six years instead. If it's true that's be great! Since my familly usually has our car paid off in 4 years that would suit me fine! Imagine paying only the price of the car and no interest! Now THAT's an incentive to buy a car!


Eric
said

I think this the start of a trend that will continue accross all automakers. For years, the financial wings of the manufactures have been inflating the residual values just to 'move the metal'. In the end they've been taking baths on the resale of the lease returns at the auction. They can't afford to keep taking losses like that. What your seeing now is greater incentives thrown at purchase financing, and leaving the residual value in the hands of the cutomers. Basically, you own the car, treat it well and you'll be better served. Abuse it and you take the rap for it.


Less greed more common sense needed
said

For too long these folks have been propping up residual values to try and be competitive. This is just one more thorn in the side of North American Auto producers who have been offering products which on balance are out of touch with the reality of fuel prices. All those pricey SUV's and 4x4 residual values are going down the tube. No surprise here! As a result of the high residuals these finance companies picked up some handsome gains now they will have to dish them back out in residual losses.

The greed in business is astounding. The subprime is teaching the finance sector a lesson and now the automotive sector enjoyed profits off gas guzzlers instead of changing their product mix and now it's time to pay the piper.




Doug BC
said

I guess,in a troubled economy,we should not be surprised by this.I think it could be a sign or tough times ahead for a lot of businesses.
The down side of this,it seems,could be our effort to reduce vehicle emmissions.If new vehicles,which pollute the least,are harder to buy,people will keep driving those older,emmission spewing clunkers.Even brand new SUV's pollute less than the cars built in the 1990's.
I wonder if the advocates for more taxes consider how difficult it is for a population of low income workers to buy newer and "greener" vehicles.


Gord
said

Wow the ship at GM is sinking pretty fast, with no incentives and probably the worst warranty (when I say that I mean you have to fight like a banshee to get anything done on warranty) I doubt GM will be selling much of anything in the future. Will GM fail ? Well it probably already has the company has been run poorly for many years. The reality of the situation is that the world does not really need the current GM there are many car makers in the world that are leap years ahead of GM. Unfortunately companies like GM that are intent on the abuse of the customer, providing horrible customer service, building junk that is designed to breakdown then why would or should consumers support such a company. Here is a clear example of what a real car company does. I purchased a 2004 lease back VW Jetta with 70K in may, I paid 16K was given a 0% 60 month finacing plan, 40K 2year bumper to bumper warranty and the car gets 50mpg. The dealer told me if I traded up before I reached 100K I would get my same purchase price back if trading up. The car is built so well I doubt I will need any warranty work but the one time I had a service concern I was shocked at how great the service guys were. Will I ever buy another GM, not in your wildest dreams.



Al Wood
said

This is a strange thing for a North American automaker to do. They are all having problems selling/leasing their inefficient vehicles due to the high cost of gasoline. To further impair the lease of these vehicles by removing incentives will only exacerbate the lack of willingness of the consumer to purchase.

The removal of incentives for new Canadian leases but not for new American leases is just one more good reason to not purchase from GM. They obviously don’t care about maintaining the Canadian market share. An odd business practice at best and at worst it points to the heart of GM’s management problem. They just don’t get it.



Trent
said

Its come full circle on the manufactures, they make more money per vehicle when a customer leases rather then purchases the new vehicle and with the low lease amounts they are able to move more new units. But when the flood of leases expire and customers return their vehicle (why have an old car when we can get a new one for less?), the manufacturer is left with thousands of used cars that they can't move. This was no surprise to anyone who has been following the annual lease numbers, this summer is seeing the highest number of leases expiring ever.


Beemer
said

Whoopeedoo, like we give a damn about it! Sorry but I would never buy an American made cars. Imports all the way!!


Shawn
said

As a General Manager in the automotive industry I find it unsettling that so many people still have not figured out that the auto industry has taken a huge turn for the better. The government standards placed on dealerships now are so stringent and the profit margins reduced so much it is surprising more have not closed their doors. Most will read this and shake their heads saying it is untrue but the reality is that the dealers have to sell incredible volume now to stay profitable. As for the leases well the cyclical nature of our economy was bound to bring the residual values out of line as they did when leases were first introduced years ago. This is not the first time this has happened. Those in leases should rejoice. If they were in a loan and tried to trade off their vehicle within three years they would be well behind the eight ball for what the vehicle was worth and how much they owed on their loan. At least with the loan it is the manufactures issue and not theirs. Our strengthened dollar created a national outcry for reduced automotive prices to be in line with the USA and the manufacturers listened. They increased rebates and consumer cash on new and by doing so destroyed the used vehicle values. Trades are worth half of what they were and people in are in exactly the same bargaining position they were when the prices were without large rebates. Don't blame the manufacturers the public created this monster.


Jim in the West
said

I agree that its a weird decision, and on its own merits probably a very bad one, but it Matt is right than this makes great sense, and just might be the incentive that buyers are looking.

As to those that complain about the Big Three, take a quick step back and listen for the "pop". The more manufacturing losses we suffer in North America, the more challanged our economy becomes.

I for one prefer to spend a bit more and buy North American.


GWinnipeg
said

Just another example of how out-of-touch North American auto makers are with the buying public.

Why would a consumer lease a vehicle from a company if it doesn't make sense to financially? Profits are down again, so instead of offering a better value and/or product to the public, they take away the incentives that really made buying GM cars an option.

I wonder if the North American auto manufacturers' CEOs are all stranded on an island somewhere, oblivious to what is being done to their respective companies. No doubt we'll all hear about more layoffs after the end of the next quarter.


PVT
said

Hey there "General Manager Shawn",

Everyone knows that dealers don't make their money on sales, they make it on after sales service and extended warranties. The volume dealers are primarily concerned with is volume related to warranty upsells and the volume in the service department.


Steve
said

I agree with Jim - buy North American. That's why I own a Honda Accord, one of the highest rated, best built vehicles in North America. Great gas mileage, great resale value, and on Car and Driver's Top 10 list for an unprecedented 22 years (and for good reason). To top it all off, it's built in Marysville, Ohio and has been for the past 26 years. Do the smart thing and buy North American! Buy a Honda - or lease it if you prefer. At least they'll welcome your business.


P
said

I am leasing a GM vehicle at the moment...the only reason why I chose GM is because I could lease! I would never in my right my buy a GM vehicle..and once my lease is up, I am giving it back....if the only incentive is to buy, GM will lose a lot of business, many people, like myself only buy foreign and lease the North American junk because they can give it back at the end of the lease...good luck to those at GM, you need all you can get!


GoGMBankrupt
said

In that case I wish GM goes bankrupt! I'll swtich soon to Toyota or other economy car manufacturer wh ohave more brain.


GWallis
said

I have all but giving up trying to make an argument when everyone bad mouths the big three for nonsense reasons. People collectively seem to forget the facts of the matter being that people in North America have wanted big cars and the big three have given them too them.. Everyone forgets that we have basically had a free ride with the cheapest energy prices among first world countries for decades. And as far as the big threes abilities to make fuel efficient cars take a look at Europe where the Japanese can’t sell a car in Europe there is too much competition with the best sellers being Ford and Opal which happens to be owned by GM by the way. Things can’t change over night. If people want smaller cars then the big three will build them, but it takes time to adapt all of that production capacity to the new demand.


pp
said

Why would you lease when you can buy for zero down and zero % financing over 60 months.... ???

I just purchased a focus like that - I know the financing is 'hidden' but with the low monthly payment I got it was too good to be true - too bad my insurance went up $700 / yr because I now have a brand new spanking car... sheesh they get you one way or another !!! should have kept the old clunker!


Roger T
said

Here it goes, the domino effect from the fallout in the US. Glad to see that our Gov't is sitting around and waiting for a economic miracle bailout from the heavens!

So the RECESSION hasn't sunk into people's minds just yet and the Gov't is in denial, lets see how hard our econmy takes when the full effects takes place.

Savings comes before the econmy.

WAKE UP PEOPLE


Mike - NWO
said

Matt,

There is no such thing as interest free. The interest that you would normally pay over the life of the loan is included in the sticker price of the vehicle.

This is why, when you pay cash, the price is lower.


Inflation Demon from the 70's
said

Inflation! The world is changing ....pay cash for a car and you get up to 20% off ..just like it was in the 70's. Isn't inflation great!


Derek,Ont .
said

I remember reading an article 10 years ago that "leasing " was the start of the death of the auto indistry . Cars to expencive for the adverage owner to but was the reason . Further ,gas has been going up for years so really it should have been no suprise for anyone who lived in the 70s to guess it would go throught the roof . Really the mangement of the North american auto giants should have known this was coming .The japanese did. Small cars , good gas mileage ,low price. GM,Ford,Chrysler , What did they do ,put all their eggs in SUVS and trucks . Well they should have seen it coming , I know I did .


Not Good for GM
said

This will be very costly to GM. All vehicles depreciate badly. It looks like I am not the only one to figure out that N.A. cars depreciate REALLY badly.
I only drive a GM because I could lease it. I certainly do not want to own one.
If I am forced to actually own a car, it will not be North American.


bunny
said

Good idea.GM helped me out when I needed a lease, now I just paid for it.Most companies do a great plan, 48 months and zero interest


Matt DIllion
said

All because they can't rent out hybrids for the masses..


Jim/ Calgary
said

GMAC Financial Services is a self-standing entity that must pursue due diligence in it's affairs. If it is not in the best interest of GMAC (not GM) then it can't carry out certain loss practices to prop up GM. Independent auditing would lead to sanctions, fines, criminal charges or possibly all three. GMAC is to act in it'sown self interest and that is not the same as the interests necessarily of GM.


Marc
said

I believe that is exactly why Honda has not dropped their prices to reflect the high Canadian dollar. A drop in base prices for new vehicles means a drop in value of used vehicles. Offer gifts to customers instead and the MSRP remains the same. G.M. dropped their prices and are now holding the bag on the devalued leases coming back.


David in Que.
said

Offering 6 year, 0% financing on vehicles that will fall apart after 4 years does NOT make more sense than leasing. The costs of ownership in the 5th and 6th year will be astounding, I know this from experience. Not being able to lease a GM at a reasonable rate will mean I will lease from another brand, plain and simple.


Bobby Boucher
said

Who would want to lease a GM product anyway.


MDinBC
said

There are two reasons why residuals are down:

1. People are buying in the US...Used vehicle prices in Canada are under extreme pressure. They will continue to fall.

2. Gas mileage...who wants a guzzler today.

Over time the price of vehicles has to get really close to the US before I will buy in Canada....let alone lease. I wonder how many others feel the same way.

tommy
said

But...I thought the credit crunch was over? On no...its not true? How will I get my next home equity loan and plasma screen tv? Why can't I get a 40 year, zero down mortgage anymore? Seems like we are headed right down the same road as the US...just like every recession before...1 year later and twice as deep.


jac
said

Heard from an leasing consultant most companies will be getting out of leasing due to the credit crunch in the US and the liability involved. So far four major companies have discontinued them.




Shawn
said

PVT Response,

Dealerships certainly make a portion of their profits in the finance office. That is true. I think you are naive in believing that everyone knows that. In fact very few do. Weekly I hear comments about how the dealerships have $10,000 markups. The truth of the matter is the finance office receives a referal fee from the banks that is at no charge to the client. Warranties have some profit and life and disability pays a referal fee as well that is also no cost to the client. Common knowledge for anyone that watches the news. For those of you that rave import, import, import! I suggest more research is needed. If you do your homework and figure out the actual percentage of depreciation you will find that it is the same. Not every unit for certain the majority. That is true for North American and Imports. I have sold them all. You should also know that even though the consumer guides rave reliability for one company or another they all break down the same. That is why when you go to your preferred dealer at 3/4 of the building is service bays.

As for the leasing that is ending. It happened before to reallign the market values and it is happening again. I would be very surprised if you don't see all the Manufacturers do it (including the imports) I know Dodge has already done it a month ago. Once the values are back in line leases will resurface.

Unfortunately the history of the auto industry is so jaded with cons and poor experiences I don't truly believe anyone will ever see that times have changed and like any industry there continue to be bad people that muddy the waters for all the good ones.

Ask the important questions to weed out the bad salespeople.

Make sure you are shown all the rebate money or customer cash so the salesperson does not try to keep it as profit.
Ask for a better rate in the finance office, the manager there has three or more to choose from and will not give you a reduced rate unless you ask (exactly the same as your local banker, I know, I worked in a bank as well)
Find out if your rebate money can be combined with good incentive rates. So you get the benefit of low rates with your great price.

Take your time. There is always another car or truck like that one somewhere.


Chris
said

When leasing started, it looked like people were saving tonnes of money for payments. But the populous got smart and realized that they were paying more... WAAAAAY MORE for a lease than to purchase. Leasing is done. Just finance your cars and buy it instead of constantly trading in your lease for another one!!!


Chris
said

Honestly...do most of you actually believe the anti NA car crap you're spouting out..or have you just heard it before, and decided to follow the masses. I've had 2 GM cars in my lifetime, that have both lasted well over 300k KM, and the one would have gone to 400k easily if I hadn't totalled it in an accident.

Also, don't forget that many of your precious foreign cars are made right here in North America anyway.

Seriously...you people need to realize that big 3 cars are just as good as foreign companies.


Mike from Canmore
said

I agree with the comments about 0% financing. I went with leasing as it is cheaper in the short run than financing a purchase. Who in this day can drop thirty or forty grand on a new vehicle. Nobody other than the rich have that kind've money laying around. If the auto companies want us to keep buying new, then make it possible for people to buy their vehicles. Zero financing is fine with me. I'll switch from leasing.


Gregory
said

I have a GM lease now and given the depreciation forecast I am glad. If the manufacturers are worried about the residuals they should sell them to the leaser's for the actual value at the time they are turned in. This way they would save shipping and auction costs. Actually they could even tack a nominal fee on for the transaction to pay the dealers for the paperwork. Now wouldn't that be an idea. eh




abes
said

Shawn,

Your comments from an "insider" are contradictory. Originally you say bank referral and insurance come at no cost to the consumer, and later correctly that they do. the dealer can offer a lower rate (by up to 1.5% to the consumer in lieu of the fee) The same can be said for the warranty and insurance products, as dealer profits are as much as 45% or more on such things.
Depreciation as a % is a useless, and unfortunately most commonly used factor. I don't spend %, I spend $. I'd much rather lose 66% on a $20k car than a $60k one.


Sam Crawford
said

And why are cars too expensive? Perhaps the CAW could offer us a suggestion as to why?



Brian
said

Just some facts to set the record straight.
.
Weather you buy or lease has no impact on what a dealer makes.
.
Manufacturers do not set residuals, it is done by an outside third company for all the makes.
.
The reason you may get a little more value in an import is because they use cheap allowing them more value to put into the vehicle.
.
Average wage and benefit at a domestic manufacturer 77.40 hr, average at an import, 43.50.
.
Unions caused the problem and will be the downfall of our car manufacturers, and possbly our economy.
.
When you buy import, even if the car is built here, many of the parts are built with child/slave labour... When you buy an import you are supporting this.


DonW
said

It seem's GM just doesn't get it. I now own a Honda Accord. Talked to a friend who owned a Malibu, after 60M km warranty they spent $2300 on three fuel pumps and $550 on front wheel bearings. Then they bought a Honda Civic which has more miles than the Malibu when it was traded. Their only expense to date has been gas, oil and tires. So I bought one and gave up on the Domestic three, have had no, and I mean none, problems and get great gas mileage. Until GM does the same I think their days are numbered.


ET
said

....so we get the strap when the US gets a bad credit rating? The loan problems were in the States, right? Can someone tell me why this is fair?


Xavier
said

People make me laugh when they say imports use slave labor and parts made abroad...you name me 1 north American automobile that is 100% built with parts from only not America..i dare anyone to find 1


Joe
said

Joe
I have always bought or leased north american cars and call me crazy but I grew up in an age where it was the norm to have a North American made car. I gave up buying some years ago in favour of lease and now have a GM vehicle that will go back next March. If I am forced to buy then it will be something that will ensure a fair resale value which of course will be European or Asian. Probably Japanese. I am afraid there will be many other GM customers of like mind. Will be tough on dealerships.


Shawn
said

Abes,

I can appreciate your point of view regarding the depreciation. You are absolutely right except that you misunderstood my point. The majority of the population is of the mind that one vehicle depreciates more then another by make or model. The true judge of this is by %. If you buy a $13,000 import and it depreciates 50% it has still depreciated the same as the $60,000 Ram or Ford or Chev or Toyota at 50%. Your point is sound there is a great deal more money lost. The problem is the example. Apples to oranges. Use the same segment of vehicles and compare a $13,000 GM product and a $13000 Import and you will see that they are the same for depreciation.

As for contradicting myself I can see where there might have been confusion there as well.

The referal fee does not cost the customer a penny. The customer is not asked to pay the dealer this fee we get it from the bank. If the customer does not ask for a better rate he or she will not get one. I also pointed out that your bank will do exactly the same thing, I worked for a national bank and I know this to be true. Like the banks auto dealerships are in business to make a profit.

Protection coverages are set and cannot not be reduced or increased. I am not sure where 45% or more came from but that may be true. It is not the case with our company. A referral fee is paid. The customer does not pay for this either. The premiums the client pays are based on the amount of the loan.

At no point in time did I say that the warranty did not have a profit. This can be negotiated but rarely is as the client does not ask.

I appreciate your cander as I believe it is valuable to make people aware of the inner workings of the auto industry. I can appreciate some form of mistrust but I guess I would point out that I am educating all who read these posts that there are available discounts. Seems silly that I would do that just to lie.

Take advantage of this buying time. The loan programs are pretty strong through all the dealers, except most of the cash is not combinable with 0%. You can have one or the other.

Good luck with your purchases.


Kim
said

I think these are two completel;y different topics being talked about here. Car Quality vs leasing. I have thre vehicals, two cars and a pick-up. One of the cars I lease and the others I own.

I actually feared this happening when GM sold GMAC. GM"s problem is not product quality, it is poor leadership and decission making at the top. I can't believe Rick Wagner and Bob Lutz keep their jobs.....these two guys are tipical of the SLICK auto industry. I mean relly have you ever seen an auto industry executive that was not a silver haired slimball.

I have driven GM cars and trucks my whole life....(well except for that 1 year I had an out of body experience and bought a Mazda).The Cadillac I have now challenges all the luxery cars in it's class, and that is not my feelings....Try JD Power. Many have said that the average person can not lay out a ton of cash to purchase......if I have to go back to purchaseing I will have to go to used.....or start buying from the US.


Saved money $$$$$$ from GMAC mistake.
said

This actually does not come as a surprise to me. When we leased of vehicle through GMAC four years ago the finacer officer at the dealer doubled up on the amount of incentives we should have been awarded. so instead of 3000 off, we got 6. Im sure this happens quite often and there is no warning system for it. Sadly for them as soon as the contract is signed they can do nothing to recify it. We wont lease again, but thanks GM! Feel bad for anyone that needs this that it will affect.


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