Friday, July 25, 2008

Chrysler Lending Arm Stops Leases

by Bill McBride on 7/25/2008 03:17:00 PM

From the WSJ: Chrysler to Stop Offering Leases Through Lending Arm

Chrysler LLC has started telling dealers it will no longer offer auto leases through its lending arm Chrysler Financial, people familiar with the matter said Friday.
...
Chrysler's announcement also comes as Chrysler Financial has been trying to persuade more than 20 banks to renew a $30 billion credit facility -- backed by car loans, leases and loans to dealers -- that was issued by the auto-finance company last year when it was carved out of the former DaimlerChrysler AG. The debt represents a sizable chunk of Chrysler Financial's $70 billion portfolio in working capital. The higher financing costs could further complicate the attempt by private-equity firm Cerberus Capital Management LP to turn around the auto maker.

Chrysler Financial is likely to see its borrowing costs rise in early August when it rolls over about $30 billion of short-term debt backed by the loans and leases it makes. That, in turn, will make it harder for the company to offer low-interest loans to buyers and for dealers to hold inventory.
More ripples ...