While leasing is a beneficial offer for car owners, many manufacturers don’t make profits by leasing cars. In an attempt to cut down the losses, several car companies announced that they are going to cut down car leasing options.
Chrysler has announced that no more Chrysler cars are available for car lease here after. The company announced total withdrawal from car leasing. However, existing lessees who own Chrysler cars need not worry, as they are not affected. Ford has also announced that an increase in price of SUV and truck leases will have to be managed by its dealers. BMW is also making efforts to make rigid leasing conditions that would bring some profit to the company.
Residual value of the car after the lease term is very important in a lease contract. Even though the car is used by someone else, residual value made it possible to reuse the car. Cars naturally have depreciation value and because of the increased gas prices, larger models are suffering a lot from depreciation. Experts never estimated that the value of such cars would reduce so much in the future. Finance companies are facing a huge loss because the residual value of cars after leasing is very less.
Car companies and finance credits made profits taking advantage of residual value in the cars. As the residual value decreased so much, there is no opportunity for the companies to make profits with leasing. Thus leasing which was seen as a win-win situation for car companies and car owners has now become a burden for car manufacturers. This is the major reason for car companies to withdraw or partially abandon car leasing option.
