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Chrysler to quit leasing vehicles

DETROIT — Chrysler LLC said Friday its financial arm will get out of the auto leasing business by the end of the month because economic conditions have made leasing more expensive than buying, for both consumers and the company.

The move comes as Chrysler Financial is in the process of renewing a $30-billion credit line with banks amid a startling drop in values for leased trucks and sport utility vehicles coming back to automakers as leases end.

Chrysler vice chairman and president Jim Press said the company wants to allocate its limited resources to retail incentives and financing, which make up 80 percent of the market, instead of leasing, which is 20 percent of the U.S. market.

The move probably won't be followed by Chrysler's competitors, but other automakers are likely to raise prices for leased vehicles because of added costs, said David Healy, an auto analyst with Burnham Securities.

"I think that the companies may de-emphasize leases by pricing them tougher," Healy said.

General Motors Corp. spokeswoman Susan Garontakos said she was not aware of any discussions at GM about ending its leasing business.

Ford Motor Co. spokesman Bill Collins said the automaker doesn't publicly discuss its leasing forecast but its business plan "always includes a certain amount of leasing to support Ford sales."

Because banks lend money based on the risk, and the risk of leases sold as securities has increased, interest rates to borrow money for leases are higher than those for retail sales, said Tom Gilman, executive vice chairman of Chrysler Financial.

Healy said Chrysler Financial probably is getting out of the lease business to satisfy lenders as it renews its credit line.

"There's a lot less risk in standard transactions than there is in leasing these days," he said.

Press said the dramatic drop in truck and SUV values at the end of their leases also played a role in the company's decision.

"We really reached a point today in this environment where the advantages of leasing, the economic advantages of leasing, have really disappeared," Press said in a conference call Friday afternoon.

Press said dealers will still be able to offer leases through independent sources, but not Chrysler Financial.

Chrysler to quit leasing vehicles 07/25/08 [Last modified: Tuesday, November 2, 2010 9:00am]
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