With all it’s might and all its money, Chrysler has decided to go full steam ahead into vehicle finance. Technically, pulling out of the leasing business was done in order to achieve one thing. Falling residual values of vehicles. Due to short term leasing, such as 36 and 48 month leases, the vehicles that were returned had no buyers. Since these cars sat on dealer lots, they had to be discounted to be moved, which caused a huge uproar and sizeable writedowns on both dealer and manufacturer level.

When a vehicle is being leased, the manufacturer’s leasing/finance arm calculates the residual value based on their estimation. Being able to tell the future is very tricky and can be costly as seen here based on the $6 billion lost by Ford and the $15 billion lost by GM.

So what is Chrysler doing to cure the problem? It is giving away vehicles. Literally. You walk in with an A credit rating, you get fixed up with $2000 cash and you sign on the dotted line for a commitment for 72 months at 0% interest.

Why is Chrysler doing this? Chrysler is artificially extending the depreciation period of the vehicle if they are financed by the masses. The huge shock that people were experiencing when they found out what their car was worth after 3 years of leasing is now moved down the road to be at the 6 year mark. Chrysler is effectively extending the depreciation cycle beyond the current values.

Why is this good for the consumer? Chrysler still has a lifetime unlimited mile warranty on it’s vehicles. Which means that as long as you’re the first owner of the vehicle and your car/trucks is not an SRT or commercially used, you will qualify. If your transmission falls out of your Caravan after 4 years, you’re covered. If it does it again another 5 years later, you’re still covered.

If you buy a Chrysler product you get peace of mind as long as you’re making your low 0% interest monthly payments for 72 months. The financing charges are less then it used to cost to lease the same vehicle for 36 months. Powertrain repairs are covered, leaving you with regular maintenance fees. Not too shabby.

Now the bad part. Since we live in Canada, none of this applies to us and we cannot take advantage of anything I’ve just gloated about.

I’m not even on Chrysler’s payroll, I swear.

In a not so suprising move, Wells Fargo and Chase Bank announced they would pull out of the leasing of cars and trucks in the United States.

GMAC has announced a while ago that they are stopping leasing operations in Canada. Interestingly enough, this comes after a little while when Chrysler Financial announced it would stop leasing operations in the United States.

Even more interestingly enough, 51% of GMAC, General Motor’s financial arm is owned by Cerberus Capital, the same people who own rival Chrysler LLC and Chrysler Financial.

Seems like everyone is getting burnt in leasing, with the exception of Wells Fargo, who claims that they are pulling out of leasing simply because there isn’t enough business for them there.

The saga continues, which will only push sales down even further. If I were a betting man, I would short GM, Chrysler and Ford stock right now.

Look for Ford’s announcement to pull out of leasing in the coming days.

Saturday Chrysler Financial has announced that it plans to exit the leasing business. In a bold move that has shocked the industry, this announcement was made on Saturday.

Spokesman Bill Porter announced, that the product mix in the United States will not include lease products in the United States.

The consumer market, as well as the erosion of residual values, have forced Chrysler, owned by Cerberus Capital to exit lease operations. As a large percentage of Chrysler product is trucks and SUV’s, which have fallen the greatest in recent times, it is hard to argue with Chrysler. It is just a very strange occurrence that they have announced to exit leasing in its entirety. To date, I’m not sure if any other manufacturer has done anything as bold as this. I know of GM and Ford’s push to decrease fleet sales by removing incentives, but this is the first change that I’ve seen as a reaction to aggressively combat declining residual values by the Big Three.

Several industry insiders are wondering exactly how Chrysler plans on making sales and continuing operations if it’s leasing services stop.

Leasing is a way for small and medium sized business to write down expenses by not directly purchasing vehicles, but rather a form of long term leasing.