The auto leasing business is crashing, with major carmakers and leading banks bailing out of what was once a lucrative line. But that could be a good thing for small leasing companies, experts say.
"It has been nuts this week," said John Blair, chief executive of Santa Barbara-based Automotive Lease Guide, which establishes baseline lease values. "There have been nonstop moves and countermoves by everyone."
On Thursday, General Motors Corp. became the latest automaker to retreat from leasing, announcing that GMAC, its 49%-owned financing arm, wrote down $716 million in leases in the second quarter and would reduce origination and increase pricing of leases in the U.S., effective today.
Earlier this week, Ford Motor Co. said that it would raise prices on some sport utility vehicle and truck leases so much that they would be "lease proof." Last Friday, Chrysler said it would abandon leases altogether.
Speculation swirled Thursday that the largest independent lease financier, US Bank, would abandon its used-car lease program. Wells Fargo & Co. said it would halt financing of any kind today, and JPMorgan Chase & Co. will no longer finance leases on Chrysler vehicles, limiting its business almost entirely to Subaru. Both the car companies and the banks have suffered as trucks and SUVs coming off lease have not held their value as expected, thanks largely to soaring gasoline prices.
But the great lease debacle of 2008 could yield surprising fruit: opportunity for the little guy.
For the roughly three decades that vehicle leasing has been available, automakers and their finance arms have dominated the market, with only the largest banks getting any real piece of the action. They did that by artificially boosting the residual value on cars and trucks -- the estimated worth at the end of a two-to-four-year leasing term -- in an effort to lower the payments for customers.
Now, with the big boys burned by the rapid depreciation of their gas guzzlers, little players that didn't offer subsidies, such as credit unions, regional banks and indirect leasing agencies, may be able to step in, said Tarry Shebesta, past president of the National Vehicle Leasing Assn.
"Our members are very optimistic," said Shebesta, also president of lease shopping site LeaseCompare.com. The key, he said, is funding. Much like mortgage lenders, big banks and carmakers tend to securitize portfolios of leases to raise cash used to issue more leases. Smaller leasing companies tend to finance their own leases and hold them.
