Lease losses rise in '98
ATLANTA - Residual losses on off-lease vehicles became more frequent in 1998, according to a Consumer Bankers Association study. The frequency of losses worsened from about 12 percent of lease terminations to as much as 20 percent, the Consumer Bankers Association estimated at its annual Auto Finance Conference here last month. Final results will be released later. An off-lease unit can cause a loss if its predicted residual value is much lower than its actual value.
NEW NEGATIVE-EQUITY RULES
WASHINGTON - The Federal Reserve Board clarified part of its rule on accounting for 'negative equity.' Negative equity, commonly called 'upside down,' occurs when a customer owes more on a vehicle being traded in than the vehicle is worth. When that customer offers a cash down payment, the Fed had proposed in December 1998 that on the finance contract, lenders would have to apply the cash to reducing the negative equity, as opposed to reducing the purchase price of the new car. As of March 31, the Fed said lenders could account for the down payment either way.
WESTAR REPORTS PROFIT
OLYMPIA, Wash. - Westar Financial Services Inc., a tiny but growing auto leasing company, is expanding outside its base in the Pacific Northwest. Westar, formerly Republic Leasing Inc., had a profit of $246,209 in the quarter ended Dec. 31, 1998, vs. a $453,224 loss in the year-ago quarter. It was the first profitable quarter for the company since it began consumer leasing in 1995. Previously, it had done only commercial leases on vehicles and equipment. The company, which entered the Arizona market five months ago, says it is the only publicly traded specialist in prime-risk auto leasing.
GARDEN CITY, N.Y. - East Coast powerhouse Chase Manhattan Auto Fin-ance Corp. opened a new regional office in Chicago this month. Chase Auto, based outside New York City, already has regional offices in California, Texas and Florida. The bank, one of the largest banks in auto finance, named Jim Coakley as regional executive to run the new office, which covers Illinois, Missouri, Wisconsin, Kansas and Iowa. Nationwide, Chase originated more than $12.5 billion in auto loans and leases in 1998.