Chase Auto Finance said Tuesday it will stop financing leases for Chrysler cars and trucks at the end of the month to keep its lease portfolio small amid a decline in the value of leased vehicles.
Spokeswoman Mary Kay Bean said the unit of JPMorgan Chase & Co. will continue to make loans for retail sales with Chrysler's dealers, but it will no longer offer leases on Chrysler, Dodge or Jeep products.
Meanwhile, The Wall Street Journal reported that Ford Motor Co. is raising the price of leases on some trucks and sport utility vehicles because of the losses the automaker's lending arm is taking.
Last week, Chrysler LLC announced that its own financial arm would get out of the leasing business by the end of the month because economic conditions have made leasing more expensive than buying, for both consumers and the company.
Leasing amounts to only 1 to 2 percent of Chase Auto Finance's portfolio, and the company feared the percentage would rise as Chrysler dealers looked for other options to continue leasing vehicles, Bean said.
"We could foresee there would be a lot of interest, and that wasn't something we wanted to handle," Bean said. "We keep it small because we were concerned about used car values."
Although Chase will continue financing leases for other automakers, it has only a small amount of business with them. Most of its portfolio is with Subaru, she said.
Chase will finance leases written through the close of business Thursday, Bean said.
Alan Helfman, vice president of River Oaks Chrysler Jeep in Houston, said he was hoping to use Chase to finance leases when Chrysler Financial gets out of the business. Leases amount to about 20 percent of his business, he said.
"I won't be able to do any more leases," Helfman said Tuesday, adding that no other financial institution appears eager to take on leases at this point.
Ford's move is expected to make several 2008 model trucks and SUVs "lease proof" because the prices will be so high that consumers won't agree to the terms, the Journal reported on its Web site, citing an unnamed dealer briefed on the matter.
A memo from Ford officials to dealers obtained by the Journal said because of the losses Ford's credit arm is experiencing, it is recalculating how much it expects vehicles such as the F-150 pickup and Explorer SUV to be worth at the end of their lease terms. Ford Motor Credit Co. took a $2.1 billion charge during the second quarter because of the value of vehicles in its lease portfolio has dropped amid a startling drop in values for used trucks and SUVs.
Midsize SUVs, on average, lost 28.7 percent of their value, from $15,577 in March 2005 to $11,096 at the end of June, according to wholesale auction data from the National Automobile Dealers Association. The figures are adjusted for variations in vehicle mileage.
Messages seeking comment were left for Ford Credit officials.
Helfman said the moves by Chase and Chrysler Financial could signal a severe cut in auto leases.
"I think there will be a profound cut in leasing business industrywide," he said.
He's hoping to persuade leasing customers to buy vehicles using more attractive incentives that Chrysler plans to offer.
Chrysler Vice Chairman and President Jim Press said Friday the company wants to allocate its limited resources to retail incentives and financing, which make up 80 percent of the market, instead of leasing, which is 20 percent of the U.S. market.
Chrysler Financial's exit from the leasing business, announced Friday, comes as it is in the process of renewing a $30 billion credit line with banks.
Because banks lend money based on the risk, and the risk of leases sold as securities has increased, interest rates to borrow money for leases are higher than those for retail sales, said Tom Gilman, executive vice chairman of Chrysler Financial.
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