According to industry insiders, Chrysler LLC will no longer offer auto leases through its lending arm, Chrysler Financial.
As consumers avoid the SUVs and other gas-guzzling vehicles they once leased in huge numbers, auto makers have seen their lease profits plummet. On Thursday, Ford Motor Co. had to write down 2.1 billion dollars related to unprofitable lease deals made by its own credit division.
Chrysler Financial will likely see its borrowing costs rise as it rolls over its own debt, backed in part by its lease business. That, in turn, will make it harder for the company to offer low-interest loans to buyers.
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Get ready to see more smart cars and fewer SUVs on the road, especially as gas prices head toward the five-dollar mark this summer.
Auto makers such as General Motors and Ford recently announced plans to close truck and SUV plants, and ramp up production of more fuel-efficient cars. High gas prices also have led to the first decline in 30 years for travelers, according to the U.S. Department of Transportation.
No doubt then, consumers lucky enough to get auto loans will be looking to spend the money on fuel sippers. As always, do your homework and see which car is right for your needs before you hit the showroom.
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It's not just car buyers who are suffering the effects of tightening credit -- auto dealers are feeling the pinch, too.
"The banks are being more picky," said Sam Novel, owner of a large auto dealership in Queens, New York. Novel is projecting his sales to be much lower this year, as fewer customers qualify for auto loans -- even for used cars.
Even for those who qualify, auto-loan rates are tougher to take these days: one bank is charging 8.94% for four-year used-car loans, another 8.74%. Applicants are urged to shop around for the best rates, particularly on one of the many auto-loan brokerage sites on the web.
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Thinking of taking out a loan to help you get rid of that gas hog in the garage? It may end up costing you in the long run.
With all the concern over gas prices, the economics of the situation can be lost -- much to the peril of your wallet. For example, trading in a 15-mpg guzzler for a 30-mpg sipper sounds like a no-brainer, until you start taking in account factors such as depreciation. If your current vehicle hasn't been paid off yet, that can end up costing you a bundle.
Even at $4-a-gallon gas prices, the fuel savings you'd enjoy could take years to show up, when compared with trade-in and depreciation costs. So think twice before you trade in that SUV for a smaller model -- maybe try walking next time instead.
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Recently released data shows that car sales have been hit by rising gas prices, especially larger vehicles such as SUVs.
"This year is going to be a pretty severe year," said Chrysler co-President Jim Press, commenting on the sales slump. The automotive industry depends on big-ticket items such as sports utility and pick-up trucks for much of its profits. Used cars also lose a good deal of value when gasoline prices rise.
GM reported that overall sales plunged 27.5% in the month, worse than the 19% drop forecast by sales tracker Edmunds.com.
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Before you consider taking out an auto loan, maybe you should think about how you're buying your car in the first place. A lot of people make mistakes -- which can be avoided if you know what they are beforehand.
For starters, buyers are often tempted to go for the hottest-looking number on the lot, which dealers are all too happy to showcase. To avoid this pitfall, experts advise, spend a few minutes thinking about what you'll use the car for -- not how you'll look behind the wheel. Hauling the kids to soccer practice? Loading groceries into the trunk on a rainy day? You'll be surprised how quickly your desires can change.
Other common buying errors include budgeting based only on monthly payment, talking trade-ins too early and not researching the dealer before you buy.
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Considering a refinancing of your car loan? You may want to consider a few other things first.
According to mortgageloan.com, "refinancing an auto loan is a lot like pistons firing on an engine -- unless the timing is right, everything will break down." Therefore loan holders should look at factors such as interest rates, and how long they plan on keeping the car once the original loan has been paid.
A refinancing has financial benefits, but remember -- you'll be lengthening the amount of time spent paying the loan, which could be months or even years. Whatever you decide, don't jump to a decision until you've taken time to think things over.
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Citibank is closing its one of its key auto-loan financing branches -- the latest in a round of industry cutbacks that could affect the consumer's ability to get an auto loan.
"The company will decrease the number of auto dealers with which it conducts business, and it has raised pricing in line with credit risk in the current environment," a bank spokesperson said. Citibank previously provided financing for auto loans to consumers via dealerships.
Consumers -- particularly subprime auto-loan seekers -- would be wise to net-search the many sites out there that provide financing, such as autoloanhelpers.com. An increasingly tightening credit market means more financial companies could be cutting back on future loans granted.
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It's not just home-loan borrowers who are feeling the current credit pinch -- auto-loan holders are finding it a tough road, too.
According to the American Bankers Association, delinquencies on indirect auto loans reached more than 3 percent in the fourth quarter of last year -- the highest rate in at least 17 years.
What may or may not make loan holders happy? "If you're going through it right now, you're not alone," says an ABA spokesperson about the current fiscal stress. What to do? Lenders suggest borrowers contact them as soon as they feel their financial burden is becoming too heavy to bear -- rather than just stop paying, which could severely hurt their credit rating.
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Before you go applying for an auto loan, be sure to check out the model you have in mind to buy -- it may cost you more down the road for insurance.
"The choice of the car itself is going to affect, in particular, what you will spend for comprehensive and collision," says Jeanne Salvatore, senior vice president of public affairs for the Insurance Information Institute.
Another surprise: "A safe car is not necessarily the cheapest car to insure," says Salvatore. For instance, a "safety-minded" car could be more expensive to repair after an accident, which would increase insurance costs.
The top 3 cars with the most expensive collision losses, according
to the Highway Loss Data Institute, are the Mitsubishi Lancer Evolution,
followed by the Mercedes CL and the Dodge SRT-4. The least expensive?
Perhaps not surprisingly, it's the Volvo XC90.
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