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GM Looks To Cut Back On Leases In Second Half Of 2017

General Motors’ captive finance arm, GM Financial, will reduce its leasing business in the second half of 2017.

“We are probably at the top end of where we want to be” in terms of lease penetration, said GM CFO Chuck Stevens during a conference call to announce GM’s second quarter 2017 earnings.

During the second quarter, GM Financial originated $6.7 billion in leases, up from the $6.5 billion a year ago. In the first half of 2017, GMF’s lease originations were $13 billion, compared to $13.2 billion in the first half of 2016. Leasing made up roughly 31 percent of GM U.S. retail sales in the second quarter according to Stevens, slightly higher than the 30 percent industry-wide.

But in the second half of the year, GMF will dial back leasing, and is targeting a lease penetration of 25 to 30 percent.

“In June, we came down to 29 percent” leasing for GM overall, and GM would likely “bring that down,” Stevens said. “We are reasonably comfortable in the 25 to 30 percent range.”

The move is an effort to reduce exposure to future losses on residual values. Industry forecast pegs values of used cars to fall as inventory of used cars increases.

Stevens also added that in today’s environment of rising interest rates, boosting incentives on loans would likely make loans more attractive relative to leases. So perhaps we can expect more loan-related incentives from The General to steer buyers from leasing.

GM Authority Executive Editor with a passion for business strategy and fast cars.

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Comments

  1. Except, it’s not always about the cost-per-month that drives leasing. I just leased our 2017 Cajun Red Bolt EV because in 36 months I want to lease a second-gen Bolt (or whatever GM has on the market at that time).

    I predict leasing will drive immature markets such as EV’s for some time, as many people I’ve talked to are in my position… they want the freedom to get “what’s next” in a fast-moving technology. GM will likely be okay with this since EV volume is a fraction of everything else they sell these days…

    Reply
  2. Like my daddy used to say: “If you can’t pay cash for it, you can’t afford it”. But that’s not the American way… Lol

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    1. So you paid cash for your house? Well done.

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      1. That’s the only thing that was justifiably financed because it’s an appreciating asset. But I still waited to have 30% down on the house and it was paid off in less than 10 years.

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        1. A good rule of thumb is to lease depreciating assets and buy appreciating ones.

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        2. when we build our first house in 1958 we had to have 25% down and your payment could not be more that 25% of your monthly salary. you also could not count your wife’s salary. that is why there were few if any foreclosures because you had skin in the game. also the interest rate was 6%

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  3. that is going to hurt a lot of corvette sales as my dealer says 40% are leases

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    1. Exactly… if you CAN afford it then you know it makes financial sense to lease instead of buy if you like to have the latest and greatest. if I could afford it I would lease a new Corvette every 24 to 36 months… I’d end up with perhaps two of each generation AND I wouldn’t have to worry about the initial depreciation hit in vehicle value during that time.

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    2. It will kill double cab sales and Terrain. Probably didn’t tell their Michigan and other high lease areas before they tricked them into taking more inventory

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  4. Then they need to offer 0% financing on ALL vehicles here in Canada, not just select ones.

    Reply
    1. Good news, everythign except 2018’s have 0% on right now!

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  5. “For its part, GM states that it is intentionally building up vehicle stock in preparation of plant retooling operations that will see the facilities shut down or slow production.

    The automaker has been providing this line for the last several months.
    In its initial explanation, GM said that it expected inventory to begin falling and be down to roughly a 90-day supply by July 1. That did not happen, as stocks rose to 105 days, an increase over the 101-day supply in June 2017, and 72-day supply in July 2016.” (Source: GMA).

    So – there’s a 105-day inventory, 2018s on the way, lease-returns starting to come in, depressed resale values … a difficult position to be in.

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  6. Leasing is good for those who want to trade every 3 years and tends to cost less, because the Residual
    is often $5k higher than trade-in value on the luxury models. If the residual is lowered top a point that a
    lease deal is about the same as a buy, GM might lose sales to other brands that still have an attractive lease deal.

    Once someone converts to buying, they might buy CPO used or keep the car longer.

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  7. With fewer leases that will hurt sales of Corvettes and Cadillacs and even high end trucks . Alot of people that buy high end luxury cars lease them so that can’t be good news for some GM models . I’ve even read where some people that purchase are going with 72 month loans or in the extreme 84 months . If you have to spread out that loan for 6-7 years either , a) you can’t afford it or, b) you are thinking of driving it until the wheels fall off .
    It’s a fact that very soon there is going to be a glut of off lease vehicles hitting the market which may hurt car sales but will be a boom for folks buying a relatively new model car with few moles and is a CPO . For now GM really has no choice but to curb leases .
    I agree with Captain Carl 100% , in my area Chevy is already offering 0% financing on every model they make and for the Malibu they are even offering deals that take roughly 5 grand off MSRP and nearly 10 grand off the Silverado .
    GM’s economist and their PR folks are trying a smoke and mirrors approach so as not to scare Stockholders or Wallstreet that they r swimming in unsold inventory . GM is in a bit of trouble right now with 2018’s rolling out and dealers lots busting at the seams with 2017’s gathering dust on their lots .

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  8. Thanks for taking the time to write this I just bookmarked this site so I can stay updated, do you guys have a mailing list?

    Reply

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