July 29, 2008

Chase terminates Chrysler leasing program; GMAC rates rise for high-risk borrowers

Unwilling to get stuck with a glut of depreciated and difficult to sell lease returns, Chase Auto Finance announced today that they will no longer finance leases for Chrysler vehicles. This news comes on the heels of Friday's announcement that Chrysler's own financing arm will exit the leasing business on August 1st.

In the announcement, Chase cited concerns about the residual value of Chrysler's current products. Since lease payments are calculated based on the anticipated residual value, any further depreciation beyond what is factored into the lease agreement would become the lender's liability.


GMAC revises lending guidelines; finance rates to rise for high-risk borrowers

In other news, General Motors' financing company GMAC has rewritten their lending policies, placing new restrictions on high-risk borrowers with poor credit ratings.

The move is part of an ongoing process to curtail loan delinquencies.

"In general terms, GMAC is not a subprime credit company," said spokeswoman Sue Mallino in an interview with Automotive News Daily. "About 80 percent to 90 percent of our credit is in the prime arena for auto financing in the U.S."

Mallino denied a report that the company would halting all leases to high risk borrowers. Instead, GMAC will ask borrowers with poor credit scores to produce a larger down payment or in some cases, move to less expensive vehicles in the GM lineup.


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