As automakers and big banks slash their vehicle leasing programs, dealers are finding few options. For customers who want or need low monthly payments, dealers say, financing will get tougher.
Since July, the Detroit 3's captive finance companies and several national banks have placed strict new limits on leasing or exited the business. Industry experts predict the cutbacks will have these effects:
-- New-vehicle purchases financed by loans of six years or longer, once rare, will become more prevalent. Loan maturities of 72 months or more now make up 43.6 percent of loans arranged by dealerships, according to J.D. Power and Associates.
-- Some independent lenders will seek to increase their leasing business, but their programs are likely to be less competitive and more restrictive than the factory-subsidized leases offered by captives.
-- Customers who still want to lease vehicles will shift from Detroit 3 to import brands.
"There is a big portfolio of customers who have leased vehicles for a long time," says Carlos Hoz de Vila, a suburban Philadelphia dealer who operates domestic and import franchises. "There's going to be a defection to other brands because now Chrysler, General Motors and maybe Ford don't offer competitive programs."
Dealers and bankers predict that huge losses on sharply depreciated big trucks coming off lease will chase more lease providers from the market or cause them to stiffen their standards.
"There are ample lenders in the marketplace, but they have all tightened credit," says Mike Baker, CEO of Bob Baker Enterprises, a San Diego dealership group that sells import and domestic brands.