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Residuals are taking the lease business to the tool shed which in turn takes product sales out for a beating as well. (http://info.detnews.com/redesign/blogs/danielhowesblog/index.cfm)

http://www.cleanmpg.com/photos/data/501/Dodge_Ram_Trucks.jpgDaniel Howes – Detroit News – July 29, 2008

Outgoing 08 Ram – As little as 10 mpg combined on E85 and 14 mpg on gasoline.

Does the sound of a toilet being flushed come to mind??? -- Ed.

There's no way this panicked flight from leases -- Chrysler first, then JP Morgan Chase, then GMAC and then Ford Motor Credit -- signals anything but worse times ahead for the Auburn Hills ward of Cerberus Capital Management and, potentially, would-be buyers of General Motors and Ford pickups.

There's also no way, or not much of one, that Chrysler, GM and Ford dealers will effectively persuade lease-leaning customers to pay a bigger chunk of their monthly cash flow for trucks that will depreciate just as fast in their drive ways as they would on finance company books. If it's painful for Chrysler Financial, Chase, GMAC and Ford Credit to take the hit, why wouldn't it be for Joe Sixpack? Answer: It would.

Gas north of $4-a-gallon, even though it's eased back in recent days, is the gift that keeps on giving.

Slackening demand begets production cuts, which begets less revenue. Declining residual values cuts finance company margins and drives estimated monthly payments higher. Higher monthly payments push buyers in other directions, causing demand to slacken… http://info.detnews.com/redesign/blogs/danielhowesblog/index.cfm

There's also no way, or not much of one, that Chrysler, GM and Ford dealers will effectively persuade lease-leaning customers to pay a bigger chunk of their monthly cash flow for trucks that will depreciate just as fast in their drive ways as they would on finance company books.

I had heard it was worse than that. The car companies were having trouble lining up financing to be able to lease vehicles in the first place.

Harry

There's one more thing that didn't get mentioned in relation to production cuts. That is the fact that there is a breakover point in manufacturiing where below a certain production level you can't make a profit. This is because some costs are variable, that is tied to the actual production, while some costs are fixed, that is tied to the building and minimum staffing levels.

Nevertheless, they all are in trouble. Personallly, I don't really see any advantage to leasing except the initial low cost to get in which may be wiped out at the end of the lease.

Faithful and True