EDWARD LAPHAM

Dealing with Chrysler on residuals... Hmmm

Edward Lapham is the executive editor of Automotive News.
In the aftermath of Chrysler Financial getting out of the retail leasing business, I wondered what would happen to the thousands of returning lessees who got highly subvented leases two years ago when Chrysler had to move a glut of Ram pickups.

So I visited a Dodge dealership.

Just what are the lease-end options? I asked the sales consultant.

“There are several,” he said. “But I’ll need some specifics.’’

I thought for a minute.

“OK,” I said. “Hypothetically … off the top of my head … let’s say the customer has an incredibly masculine, Hemi-powered 2006 Ram 1500 SLT Quad Cab 4x4 short wheelbase in beautiful Patriot Blue -- with, oh, fewer than 9,000 miles.”

The consultant said that if the hypothetical customer wanted to buy a 2008 Ram, he had plenty in stock with lots of nice, fat incentives.

But what if this customer wanted to lease another truck? He’d be out of luck, right?

“No problem,” he said.

It turns out that dealership is doing lease business with U.S. Bank. But he admitted that the residual value would be a lot more realistic than it was two years ago, which means the monthly payments would be higher.

No doubt.

“Or the customer could buy his current truck,” he said. “We’d rather sell a new one but want to keep the customer happy.”

Given the high residual value, that would be expensive, I mused.

“It would depend on the lease-end payoff amount,” he said. “Give me a number.”

OK, I thought. Off the top of my head, let’s say, $22,027.33. Ouch! I knew no one in his right mind would pay that much for a 2-year-old pickup, even an incredibly masculine, Hemi-powered 2006 Ram 1500 SLT Quad Cab 4x4 short wheelbase in beautiful Patriot Blue that has fewer than 9,000 miles.

“No problem,” the consultant said.

He explained that Chrysler Financial has something called the Preferred Lessee Purchase Price -- or PLPP for short -- that could knock several thousand dollars off the payoff amount.

Give me a number, I said.

He dialed up Chrysler Financial and came back with it: $18,127.33.

That’s still too much to pay for a 2-year-old pickup, I told him. Heck, you can buy one for a lot less at almost any used-car lot.

He allowed as how, yes, you probably could … but you wouldn’t know who had driven that other truck or how it was cared for.

But I was on a roll.

It’s obvious that Chrysler Financial is faced with eating the huge difference between the residual value and what the truck fetches at auction and wants to entice the hypothetical customer to take a bite of it, too.

How clever!

The sales consultant shrugged his shoulders.

He thought for a minute, then asked, “Have you thought about a Dakota?”

You can reach Edward Lapham at elapham@crain.com

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