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Chrysler to resume leasing after 1-year break

Chrysler Group LLC says it will return to leasing vehicles after a yearlong hiatus.
/ Source: The Associated Press

Chrysler Group LLC is getting back into the leasing business in an effort to boost sales, but don’t expect a return to the inexpensive lease deals of the past.

The automaker announced in a statement Wednesday that it will resume leasing for all 2010 Chrysler, Dodge and Jeep models starting Thursday, and it will offer some special deals on selected vehicles through Sept. 30.

Chrysler brand CEO Peter Fong said in the statement that leases will give more options to consumers and will be competitive with the U.S. auto market. The leases will be underwritten by Chrysler’s new preferred lender, GMAC Financial Services.

But the market isn’t as competitive as it once was. As recently as last summer, automakers were using cheap lease deals to clear dealer lots of unwanted cars and trucks. But now most automakers have cut factory production to match lower sales, and most have record low inventories.

“We are going to be competitive in the marketplace,” said Chrysler spokeswoman Kathy Graham. “But it is today’s marketplace we will be competitive in.”

Chrysler Financial, the automaker’s old preferred lender, got out of leasing in August of last year when the financial markets collapsed and values plunged for vehicles coming off leases. GMAC was later named by the U.S. government as the lender for both Chrysler and General Motors.

Without Chrysler Financial’s backing last year, Chrysler dealers were forced to find other lenders to underwrite leasing, and few would do it.

In the past, automakers’ finance arms leased vehicles, then bundled them and sold them as securities to investors. But the market for the securities dried up when the values of cars and trucks plummeted at the end of their lease periods last year.

Automakers and their finance arms lost millions when the values of sport utility vehicles and trucks fell dramatically last summer when gas prices rose beyond $4 per gallon.

The new lease deals likely will give people lower payments than buying vehicles, however, and could make more people eligible to buy vehicles.

“There are customers in the marketplace that really don’t want to buy a vehicle,” Graham said.

Chrysler shut its factories during its 42-day stay in bankruptcy protection that ended in June, and it has kept many of them shut down much of the summer. The shutdowns, coupled with the government’s Cash for Clunkers program that boosted sales, brought Chrysler’s inventory to a 28-day supply at the end of August. That compares with a 93-day supply in August of last year, according to the company.

Lease deals were responsible for more than than 20 percent of Chrysler’s sales during the first seven months of last year, but that figure dropped to under 2 percent for the first eight months of this year, according to the automotive Web site.

Chrysler and General Motors Co. have received a combined $65 billion in federal aid, and the U.S. Treasury Department’s autos task force engineered a takeover of Chrysler by Italy’s Fiat Group SpA. The government also named GMAC as the preferred lender for both Chrysler and GM.

GMAC, which all but exited the leasing business with GM last year, resumed leasing on selected GM vehicles last month.

Chrysler vehicles with special lease rates through the end of September are the Chrysler Town & Country and Dodge Grand Caravan minivans, the Dodge Ram 1500 pickup, the Dodge Journey crossover vehicle and the Jeep Wrangler and Liberty.

Terms of the leases will be released on Thursday, Graham said.