When will the first car leasing companies go bankrupt ?

[joer00]

I am surprised that we do not hear more about car leasing companies being in panic mode. With the latest news of autonomous AP coming sooner than expected, current cars will depreciate even more again.

The problem is not anymore only Tesla, it's the Germans in panic mode now coming with exciting BEV's. Why would I buy a BMW 3 series, Audi A4 or BMW C class if I know that in one year I can have a Tesla M3 and in two years a BMW 3 series for the same, or even cheaper price ? The pretty only reason to buy a S class or BMW 7 series is the much nicer interior and build quality. But once they have an electric offer, only a small minority will buy a German ICE.

Those ICE cars without AP will be worth nothing ! How bad it can be I just realized after talking to a good old friend from Germany. Showing off with my P85D acceleration he asked what the top speed is and laughed about the Tesla's 155 mph (for seconds) as his AMG 550 Mercedes with 500 HP goes 200 mph ! He bought it used and paid 10k !!!

I think that will be the value of a BMW 3 series, Audi A4, Mercedes C class bought today for 40k in 3 years. However looking at the lease rates, they should be worth almost 3 times that value !

What will we do with all those ICE's which nobody wants and become useless ? The Germans had a while ago a government sponsored "cash for clunkers" offer. I think something like this might happen again where you get an incentive to buy a BEV and your ICE's will go right into the junk press

It will be very interesting and I am glad I am not in the car lease business

 

[jbcarioca]

Don't Panic! The answer is 42.

Seriously, leasing companies have dealt with technology and model changes in cars, airplanes, boats and industrial equipment. There have been disruptive events in all of these. Think piston-turboprop-fanjet in airplanes, or B747-8 and A380. Think Liberty ships top Supertankers and container ships. Think first generation BMW 740/750. The list goes on.
The leasing companies survive these disruptions with odd exceptions. Residual values are normally set with conservative expectations or are subvened by manufacturers. Those BMW and non-AP Tesla will still sell, still have value.

 

[SabrToothSqrl]

I often find it useful to drive at 200 MPH... lol.

 

[jbcarioca]

I often find it useful to drive at 200 MPH... lol.

Maximum Plaid coming up

 

[voyager]

The issue is not leasing or leasing companies. By nature they are intermediaries that adapt to the situation. After all, leasing is just a clever way of getting things off balance and making assets liquid. The real issue is with car companies themselves, and their outdated business model of developing and selling ICE cars.

What does surprise me is that car leasing and car rental companies aren't more actively involved in the providing process as a whole. That's being taking over by a new sort of more Silicon Valley flavored company.

 

[B8BB8B]

Off topic but not off topic but GMAC already went tits up ( GM's version of leasing )

Not because of technology but because of a failed leasing system.

 

[McRat]

Off topic but not off topic but GMAC already went tits up ( GM's version of leasing )

Not because of technology but because of a failed leasing system.

GMAC was highly profitable when General Motors sold the controlling interest to try and save GM from bankruptcy. Sort of a stupid move when you think about it, but they didn't have too many options at that point.

It is now known as Ally, and showed a $1.3 billion dollar profit last year. It is still a money printing machine.

 

[kort677]

I don't think that many of you understand the finances of leasing, you are not leasing a car, you are leasing money which you turned into a car.
this form of issuing credit is usually very profitable because unlike many other loans in this case the money is used for a tangible that can easily be taken from a non performing lessee very easily can be re-leased or sold.
I don't think there is any danger of car leasing companies going under en masse

 

[kort677]

Off topic but not off topic but GMAC already went tits up ( GM's version of leasing )

Not because of technology but because of a failed leasing system.

I'm not trying to be argumentative but this comment could not be further from reality.

GMAC never went tits up, it was never in any sort of financial trouble. GM spun it off to generate cash to stem the losses from it's manufacturing side.