Tuesday, July 29, 2008

GM Ends Attractive Lease Rates Effective Aug. 1

Forget Barack Obama, John McCain, or even Ralph Nader. The real news here is the current north american auto industry. If you haven't heard the news or have been living in your parent's basement since 2000, they (GM, Ford, Chrysler) are in dire straits lately. With Ford and GM both posting record Q2 losses, the cracks are indeed starting to appear on the worlds largest automakers in North America.

GM announced today that it is ending all attractive (low interest rate) lease rates. So what that means to the average consumer is, if you want a GM vehicle and you really want to lease.... you are screwed. Expect to pay 5-8% lease rates starting August 1st. Unless you have deep pockets or drive low kilometers, I really don't think anyone should lease a vehicle. I don't have deep pockets but I lease a 2007 Subaru Impreza through GMAC LeaseCo. That's right. GMAC LeaseCo underwrites Subaru of Canada leases. Didn't know that? Well you can thank me later because I managed to get my Scooby at 0.9 % for 48 months with almost nothing down.

But leasing is expensive. You pay more in the long run because you pay for the depreciation of the vehicle over the time you own it. If you put any extra wear and tear into the car (ie. cigarette burns, big scratches, dents), you are on the hook to fix it. If you exceed your maximum kilometer allowance, you are in deep shit. Unless you buy out the car at the end of your lease (usually at a ridiculously high residual rate), you could pay thousands of dollars depending on how much you went over the allowance. Sure, you could BUY the kilometers at the time of leasing - but who does that? You don't get your money back at the end of the lease anyway.

GM's own problems are due to an eroding market share, mostly crappy products, and an incredibly expensive debt and pension load. If GM didn't have any of these problems they'd be doing as good as Honda or Toyota. The only way the big 3 car companies are going to exist is if they get bought out by a foreign company or they merge together to form one big company. Either way you are looking at even more job cuts. I feel bad for the folks who are losing their jobs at auto plants. Didn't GM recently sign a labour agreement in Ontario 9 months ago? Now they're closing those plants down. If you currently work at a Hummer dealership the writing is on the wall. GM is secretely trying to buy out those dealerships to collapse them. The era of big SUV's and pickup trucks are coming to slow end.

I used to be the biggest GM fan boy. I drove a 1984 Chevrolet Custom Deluxe C10 pickup truck. It was a 3-on-a-tree standard truck. She was a beauty, but it was very unreliable at times. Then again, I was pretty rough with vehicles. I then switched to a Ford pickup truck... and after I got tired of paying $10.00 per day in gas, I decided to get a 2000 Chevy Cavalier. I drove two Cavaliers - a 2000 and then a 2003 car. By 2007 I was so sick of crappy Cavaliers that I jumped to Subaru for a break. And boy was I glad I did. Gone was the crappy build quality. Gone was the repeated random problems that would appear. It's like I got rid of a curse.

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