Noise, Vibration, and Harshness: Rise and Fall of Consumer Finance

So, you can't lease a Chrysler, Dodge, or Jeep for love or money. This can't please dealers, who got precisely one week's notice of a radical change in their business plan, or workers, whose livelihoods depend in part on those leases. Nor will it comfort those who could obtain a piece of pentastar magic only via low monthly lease payments. Now you can buy your Chrysler over 72 months if you want to keep the payment low, or you can pay cash. Cash up front for a Caliber? Six years paying for one? Now that's Mopar madness. Even mighty Toyota will write off hundreds of millions in lease losses this year, but not all carmakers are hurting. Many whose product lines are more in tune with the current mood continue to offer leases, which should further depress Detroit, as limiting finance options for its customers poses another competitive disadvantage. But for the hurtingest of the hurting, look no further than Cerberus Capital Management, the private equity firm that bought Chrysler last year for $5 billion. If that fact alone doesn't make you feel sorry for Cerberus, consider this: it also bought Chrysler Financial, the credit arm that wrote many of the leases now immolating cash reserves. Recent factory discounts on Dodge Ram pickups of 40 percent off list can't be helping residuals, but that's only one worry. Shortly before acquiring Chrysler's portfolio, Cerberus bought a controlling interest in General Motors Acceptance Corporation, the captive finance arm that GM founded in 1919. GMAC has since been burned not just by its vast exposure to truck and SUV leases but also by huge losses in the subprime mortgage market. So, well done, fellows. Maybe Daimler had the right idea dumping Chrysler. With the residual free fall killing leasing, can regular loans be far behind? They're risky now, too. People walk out on loans when they're upside down more often than when they have equity. So, although the disappointment might not be as universal as it is with leases, pencil in more losses from good old-fashioned loans. That is, until Detroit starts building more vehicles that hang on to their value, ones that people want today and will continue to want 24, 36, or 48 months from now.