Chrysler Reinstates Leasing Program after One-Year Hiatus

DETROIT - The ailing Chrysler Group is jumping back into the business of auto leasing in an attempt to improve sales, but shoppers should not anticipate a return to the ultra-affordable and incentive-packed leasing deals of prior years.

The car manufacturer announced last Wednesday in a press statement that it will begin leasing on all 2010 Jeep, Chrysler, and Dodge vehicle models beginning Thursday. Additionally, Chrysler buyers will have their choice of a few other special deals on certain vehicles through the 30th of September.

The CEO of Chrysler, Peter Fong, explained in the statement that auto leases will offer more options to buyers and will be different from past years but still competitive in the American auto market. Chrysler's new lending partner, GMAC Financial Services, will underwrite the new leases.

However, the leasing market is nowhere as competitive as it used to be. Just last summer, auto manufacturers were using inexpensive lease deals to clean out unwanted trucks and cars from dealer lots. But currently, most car manufacturers have scaled back factory production in response to lagging sales, and most also have historically small vehicle inventories.

"We are going to be competitive in the marketplace," commented Kathy Graham, Chrysler spokeswoman. "But it is today's marketplace we will be competitive in."

The manufacturer's former preferred lender, Chrysler Financial, pulled out of the leasing business in August 2008 in response to the collapse of the financial markets and the plummeting values of recently leased vehicles. Later, the federal government tapped GMAC as the new lender for both GM and Chrysler.

Stripped of the support of Chrysler Financial last year, Chrysler dealers had no choice but to find alternate lenders to underwrite their leases, and not many would agree to do so.

Previously, carmakers' financial branches issued auto leases and then sold them as securities to investors after bundling them together. However, the market for these kinds of securities vanished last year when car and truck values bottomed out at the conclusion of their lease periods.

Carmakers and their financial arms hemorrhaged millions of dollars when the truck and SUV values plunged dramatically in the summer of 2008 when gas prices skyrocketed past $4 per gallon.

The newly reinstated leasing deals will more than likely offer shoppers more affordable payments than purchasing vehicles, however, and might make more consumers eligible to buy a new vehicle.

"There are customers in the marketplace that really don't want to buy a vehicle," explained Graham.

Chrysler closed down its factories during a 42-day bankruptcy stay that concluded in June, and the automaker has kept many of these factories closed for the better part of the summer. The factory shutdowns, along with the federal government's Cash for Clunkers program that dramatically boosted sales, pared Chrysler's August 2009 inventory down to a 28-day supply. This figure contrasts with the 93-day supply of August 2008, according to Chrysler.