Chrysler LLC dealers were stunned by news that they no longer will be able to offer leases through the automaker's captive finance arm, Chrysler Financial, starting Aug. 1.
"We're shocked," said Tom Vann, owner of Team Hillsdale Chrysler-Dodge-Jeep in Hillsdale, Mich. "Leasing is about 70 percent of our new-car business." But Vann said the competitive impact depends on whether other manufacturers follow Chrysler's footsteps: "If it becomes the trend, it doesn't matter."
Vann, whose business is dominated by Internet customers, said his sales staff is "going to target the lease clients right now. Boy, let's jump on the train because it's left the station on July 31, and it's not coming back."
Chrysler co-President Jim Press told dealers and journalists Friday that Chrysler will try to redirect resources from leasing into retail offers to reduce payments.
Leasing is attractive because it lowers monthly payments. But Chrysler and other automakers are losing money on leases as residual values of big vehicles, such as SUVs and pickups, fall far below predicted levels.
John Schenden, owner of Pro Chrysler-Jeep in Denver, said leasing has declined at his dealership this year as leasing companies tightened conditions for deals. "Two years ago we used to do 40 percent leasing, and this year it's about 10 percent," he said. "We'll adapt; we'll sell cars, make a buck and serve our customers."
But Earl Hesterberg, CEO of Group 1 Automotive, the fourth-largest U.S. dealership group, disagrees. Hesterberg, whose company is suing Chrysler Financial over floorplanning issues, said: "I really don't see how they can be competitive at all in the marketplace with this kind of action."