General Motors Company has turned away from its preferred lender, GMAC Incorporated, and expanded its financing options for prospective buyers by turning to leases written by U.S. Bank. The leases are part of a pilot program that includes select GM vehicles sold in New York, New Jersey, Connecticut, Michigan and Ohio.
In addition, a lease on the all-new Cadillac SRX will be offered by U.S. Bank nationally. The pilot is currently planned to run through August 31, 2009, but will likely be extended if it works.
“GM and our dealers have done an incredible job without a leasing program throughout this difficult economic period, but we always knew that we would get back into leasing as it is important to a certain group of our customers,” said Mark LaNeve, GM vice president of U.S. sales.
GM dropped leasing one year ago when resale values plummeted, forcing a write-down by the finance company GMAC of the value of the vehicles coming off lease. Before dropping leasing, an estimated 25% of the sales of GM vehicles were accomplished by the financial device that allows lower monthly payments and use of a vehicle for a limited time compared to an outright purchase.
LaNeve estimated that the lack of leasing has cost GM one to two percentage points of market share, at a time when the company must prove it can halt its decades’ long decline in share, which is currently running at about 18%. Leasing is particularly critical in the luxury segment where Cadillac is just introducing two new models, SRX and CTS Sport Wagon.
Lease offers will be available on the 2009 Cadillac CTS, Chevrolet Malibu and Traverse. For 2010 models, leases will also be available on the Cadillac SRX, Buick LaCrosse and Enclave, the GMC Acadia and the Chevrolet Equinox. Monthly payments will vary, according to the customer’s down payment and the first month’s payment due at signing, but are expected to be “very competitive.” No security deposit will be required.
U.S. Bancorp (NYSE: USB), with $266 billion in assets, is the parent company of U.S. Bank, the 6th largest commercial bank in the United States.
GMAC itself remains severely challenged, as it continues to report huge losses because of loan defaults and the depressed housing and auto markets. In the second quarter of 2009 GMAC posted $3.9 billion loss compared to a net loss of $2.5 billion in the second quarter of 2008. Results included a $1.2 billion tax charge caused by converting to the financial holding company to a corporation. To date, GMAC Incorporated has accepted $13.5 billion in U.S. taxpayer funding. The government has a 35% stake.