GMAC Financial Services said Tuesday it will suspend subsidized leasing of automobiles in Canada as of Aug. 1, citing tighter finance conditions and recent drops in used-vehicle values.
The finance company will continue to offer standard rate leases in the country, said GMAC spokeswoman Gina Prioa to the Associated Press. No similar announcements were made regarding U.S. GMAC leases, she said.
Lease incentives allow manufacturers to offer lower monthly payments by subsidizing the cost of financing the vehicle. That can help attract business in the current environment with record-high gas prices and a drop in auto sales, especially sales of trucks and sport utility vehicles.
Detroit-based General Motors Corp. currently offers Canadian leasing incentives such as rates as low as 0.5 percent for up to four years on its Pontiac Montana passenger van and Torrent SUV.
The move by GMAC, the biggest auto lender in North America in terms of volume, follows Chrysler LLC's Chrysler Financial arm, which notified dealers Friday of its plans to end leasing in the U.S. Chrysler Financial also cited the decline in used truck and SUV values as a reason for its decision.
Wholesale prices of used pickup trucks dropped 11.2 percent during the second quarter, while wholesale SUV prices fell 9.6 percent, according to National Automobile Dealers Association AuctionNet data released by the NADA's Used Car Guide.
Both GMAC and Chrysler Financial are owned by Cerberus Capital Management LP. The private equity firm owns 80.1 percent of Chrysler and a 51 percent stake in GMAC.
The two automakers aren't the only ones hurt by increases in leasing costs. Ford Motor Co.'s credit arm Ford Motor Credit took a $2.1 billion write-down in the second quarter because of the drop in resale value of leased trucks and SUVs.