FARMINGTON HILLS, Mich. and FORT WORTH, Texas — Both Chrysler Financial and Chase Auto Finance have announced that they will no longer offer leases for Chrysler vehicles as of Aug. 1. Chase will continue to offer leases for other automakers.
Chrysler's abrupt end to leasing is an attempt to avoid more losses from slow truck and SUV sales and falling residual values, according to Vice Chairman/President Jim Press. "We have really reached a point today in this environment where the economic advantages of leasing have disappeared," Press said. "There has been residual decline on vehicles leased three years ago. The biggest decline is in trucks and big SUVs. We had to absorb a higher amount than anticipated for write downs. We do see a continuing decline."
Chase Auto Finance will continue to make loans for retail sales with Chrysler's dealers, but it will no longer offer leases on Chrysler, Dodge or Jeep products. After Chrysler Financial's announcement, the company was concerned it would be flooded with lease financing requests from dealers, according to Chase spokesperson Mary Kay Bean.
"Leasing is a small part of our portfolio and we intend to keep it that way," Bean told the Associated Press. Leasing represents 1 or 2 percent of Chase's total automotive finance portfolio, but the company was concerned that number would rise as Chrysler dealers looked for other options to continue leasing. "We could foresee there would be a lot of interest, and that wasn't something we wanted to handle," Bean told the Associated Press. "We keep it small because we were concerned about used-car values."
Press said that Chrysler Financial 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. Chrysler dealers will be able to continue to offer leasing through other financial institutions. 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."