Welcome Back GM

GM's announcement yesterday that they will get back into consumer vehicle leasing is great news. Even if it is only available on their luxury lines, it should spur action with the other captive finance companies and hopefully create a spark with independent banks.

Wells Fargo, Huntington and Fifth Third are three independent banks with a long history of vehicle leasing. Along with virtually everyone else, they suddenly exited the market about this time last year with a rash reaction to $4 / gallon gasoline and Chrysler, GM and Ford's mass exodus out of all or most of their previous leasing program.

The market is in desperate need for new lease funding sources - particularly with late model pre-owned. Unfortunately, most banks' risk managers have unfounded fear about pre-owned leasing (POL).

If they would think about it, a 36 month pre-owned lease on a 1YO vehicle poses LESS residual risk than the same vehicle leased a year ago for 48 months. Both vehicles will come off lease at the same time but the pre-owned lease encountered most of its depreciation under different ownership.

There used to be some legitimate concerns about existing equipment on a pre-owned vehicle - or lack thereof. However, Chrome Data and other vehicle configurators are mitigating much if not all of that risk.

I just don't get the banks' negative views on POL.

Regardless, GM's re-entry into the leasing market is good news. Here's hoping they learn from past mistakes and resist setting unrealistically high residuals.