Tuesday, July 29, 2008

Lease no more?

The decision of whether to buy or lease an automobile just got a lot simpler for Canadians, as GM Canada announced yesterday that it is getting out of the leasing business effective August 1. This is in response to the fall in resale values of SUVs and pickup trucks with the recent surge in oil prices: off-lease vehicles are becoming a hot potato, and GM doesn't want to be the one that gets burned. So far, Chrysler Canada will continue to offer leasing, although their U.S. counterpart announced on Friday that they are exiting the leasing market.

An interesting aspect of GM's announcement involves the alternatives that they are suggesting:
Instead, the sales leader in the Canadian market will offer alternatives such as interest-free loans for as long as six years in hopes of keeping monthly payments on vehicles purchased with loans close to what monthly payments would have been if the vehicles were leased.
This represents a major change in the way consumers "buy" vehicles. My thoughts on GM's product offering aside, taking away the option of a low monthly payment will likely keep a lot of potential customers out of the new-car market. I think this is a good thing, in the long run, if it gets people out of the monthly payment mindset and forces us to rethink what we can really afford, but this benefit won't come without some initial pain.

Like the rest of the easy-credit business that has been blowing up recently, we have some rocky times ahead of us before we get past the consequences of our poor choices.

The SUV's latest victim: Leasing

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