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Chrysler Getting Out of Leasing

July 25, 2008

AUBURN HILLS, Mich. -- Chrysler LLC announced Friday that it will no longer offer vehicle leasing to customers through its captive financing division.

The company's abrupt end to leasing is an attempt to avoid more losses from slow truck and SUV sales and falling residual values. "We have really reached a point today in this environment where the economic advantages of leasing have disappeared," said Jim Press, Chrysler’s vice chairman and president.

He cited available capital and the cost of subsidizing leases as reasons for moving away from leasing. "There has been residual decline on vehicles leased three years ago. The biggest decline is in trucks and big SUVs," Press said. "We had to absorb a higher amount than anticipated for write downs. We do see a continuing decline."

Chrysler Financial will end its leasing programs on Aug. 1. However, dealers will be able to continue offer leasing through other financial institutions, Press said.

Press said the financial division still has the capital to support leasing, but chose to refocus its resources on the retail market. Part of the company's plan is to provide competitive retail rates to customers who may have been drawn to the traditionally lower payments offered by leasing contracts.

Press hopes that the lack of leasing contracts will encourage consumers to buy vehicles.

"The reality is the trade cycle between a lease and a purchase isn’t that different," he said. "We want to set a new way for the customer instead of holding on to the past."

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