Auto lease datapoint of the day

By Felix Salmon
September 21, 2009

Last month, Bill Wamsley, a commercial real estate broker in Mill Valley, Calif., hoped to replace his wife's Lexus sedan with a 2009 Cadillac CTS.

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From the WSJ:

Last month, Bill Wamsley, a commercial real estate broker in Mill Valley, Calif., hoped to replace his wife’s Lexus sedan with a 2009 Cadillac CTS.

From information Mr. Wamsley collected online he determined a CTS lease would run around $580 a month when all costs were factored in. After some shopping, he found he could lease a Mercedes C300, with roughly the same retail price, for about $450 a month.

General Motors spent so many years as a leasing company with an automaker attached that it must feel weird to see the tables turned like this.

$580 a month is $6,960 a year, or 19% of the $36,560 base price for the Mercedes. $450 a month, by contrast, is $5,400 a year, or 15.5% of the $34,650 base price for the C300 Luxury. The difference, of over $1,500 a year, is significant enough that GM is now faced with an invidious dilemma: either risk blowing up their loan book, or else reduce their prices so much that they’ll never make any money making cars.

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5 comments so far

you mean the $36,560 base price for the CTS, right?

Posted by bdbd | Report as abusive

I thought the CTS was at the top of the Caddy line, and thus it’d be impossible for GM to do what Mercedes does (subsidize the lower rates from the expensive top end). But it seems the problem (the continual problem for all US auto) is more indemic in that there is little difference between Caddy models. There’s no top end, no bottom end, just mediocrity.

The CTS is the bottom end of the caddilac line, but also their best car.

What it comes down to is this: Both makers are now leasing at the real depreciation rate. GM can’t go lower, and Mercedes used to go higher.

And the depreciation on a CTS frankly, SUCKS, compared to a mercedes. Which is great for used buyers (wait a couple years and get a used CTS-V and humiliate your bimmer-driving friends), but sucks for Government Motors.

Posted by Nicholas Weaver | Report as abusive

Or you could just save your $580 (plus the cost of insuring a new car) and keep your old car. Alternatively, you could just buy a car outright instead of paying interest on a depreciating asset.

If you are careful and patient, you can actually buy a car below market such that you can resell it for the same price a few years later. BTDT on my last three cars, one actually went up in value as gas prices rose….

I think GM was worried about losing their business customers, who leased there luxury vehicles for tax right off purposes.

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