By JOHN D. STOLL, LIZ RAPPAPORT and MATTHEW DOLAN
July 30, 2008; Page A1 WSJ.com
Detroit’s money troubles are starting to put a key part of the American dream — a pricey new car — out of reach for some people.
Squeezed by falling used-vehicle prices, as well as continued tumult in the credit markets on Wall Street, Ford Motor Co. and General Motors Corp. are significantly scaling back their auto-leasing business.
Ford on Tuesday began telling dealers that it is essentially ending leasing deals on most trucks and sport-utility vehicles. GMAC LLC, GM’s financing arm, is also expected to rein in leasing offers in the U.S. soon, possibly this week, people familiar with the matter said. On Tuesday, it said it will no longer offer subsidized leases in Canada. Chrysler last week said it is ending all leasing deals in the U.S.
Leases at the Big Three auto makers account for about 20% of their total new-vehicle business, according to Automotive Lease Guide.
The rise of hefty auto incentives — including subsidized leases — came amid the same broad expansion of easy borrowing in the 1990s and 2000s that buoyed American housing prices. Now, in both houses and autos, the previous virtuous circle has yielded to a vicious one, with prices falling and credit growing tighter.
Banks are also turning their backs on leasing as falling used-car prices make the business less profitable. The auto-finance unit of Wells Fargo & Co. has also told dealers it will no longer finance leases beyond this month, a spokesman confirmed. In reaction to Chrysler’s announcement, Chase Auto Finance, a unit of J.P. Morgan Chase & Co., decided it will no longer provide lease financing for any Chrysler, Dodge and Jeep models.