But the current situation with Chrysler Credit, Ford Motor Credit Co., and GMAC illustrates that leasing is often not a bad deal at all.  Ford took a $2.1 billion dollar charge to account for over-residualized lease vehicles.  GMAC took at $716 million charge.  What people forget is that customers were on the other sides of these transactions.  Those billions of dollars are losses that lease customers do not have to take.  At the end of their leases, they can stroll into a dealership, drop off their leased vehicle, and not worry at all about the fact that their vehicle’s value has dropped like a rock.  But what about the people who “bought” their SUV’s or pickups?  Collectively, they have lost billions.  The shift in gas prices has caused a massive loss in the value of most Americans’ vehicles.  

So the next time that you hear someone telling you that they would never lease a car, ask them why they haven’t traded that Hummer.

World Omni’s response was successul, but the the program put the factory in direct competition with the dealers.  Normally, when a lease terminates, the dealer has a chance to sell a new car, and can often pick up the lease turn-in at market value.  But when World Omni convinced the customer to buy the leased vehicle, the dealer never saw the customer.  The transaction was handled by mail – no sale – no financing – no customer.  Even worse, the deal usually took the customer out of the market for several years. 

I have no inside knowledge of how Chrysler Finance and Ford Motor Credit will deal with this problem.  Maybe I am just worrying for nothing (worrying is my job!).  But if Ford and Chrysler dealers find themselves up against a strong new competitor, I would not be surprised.