No wonder Chrysler is in trouble

[cornbeef]

This blew my mind today.

A friends 300 lease is ending and he took it to the dealership so they could check it over, even though he planned to buy it out. The dealership told him that now that Chrysler no longer does leases, their existing leases have changed and the buy out price is not the amount on the lease but market value His contracted value was something like $14k and they say it's worth $20k+ Needless to say my friend is pissed as the car only has around 10k miles and still looks brand new.

I find it incredible that Chrysler would not be thankful of anyone who would buy/keep any cars right now and would want a gas guzzler back on the lot. I can't even contemplate how can they even attempt to try and go back on a lease contract.

He still has a few months left to sort things out, but I just had to throw it out there as I'm dumbfounded. It's no wonder this company is in trouble, I'm sure they are / will be others in the same boat that will be turned off buying another Chrysler product by this.

[JWA]

Was it an open-ended or closed-ended lease? In most states, open-ended leases are not legal. If it is a closed-end lease, then the residual value (buy-out) is set in the contract and can't be changed mid-stream.

Tell him to check through the contract because it could just be that the dealer sees an opportunity to pay off the car for $14K and throw it on the lot for $20K.

[ivan1]

Is it any wonder:

NEW YORK (Reuters) -- Moody's Investors Service today downgraded its ratings of Chrysler LLC further into junk status and said it may still cut the ratings further.

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From Automotive News:

Dealing with Chrysler on residuals... Hmmm

Edward Lapham
Automotive News
August 8, 2008 - 4:59 pm ET

In the aftermath of Chrysler Financial getting out of the retail leasing business, I wondered what would happen to the thousands of returning lessees who got highly subvented leases two years ago when Chrysler had to move a glut of Ram pickups.

So I visited a Dodge dealership.

Just what are the lease-end options? I asked the sales consultant.

"There are several," he said. "But I'll need some specifics.''

I thought for a minute.

"OK," I said. "Hypothetically … off the top of my head … let's say the customer has an incredibly masculine, Hemi-powered 2006 Ram 1500 SLT Quad Cab 4x4 short wheelbase in beautiful Patriot Blue -- with, oh, fewer than 9,000 miles."

The consultant said that if the hypothetical customer wanted to buy a 2008 Ram, he had plenty in stock with lots of nice, fat incentives.

But what if this customer wanted to lease another truck? He'd be out of luck, right?

"No problem," he said.

It turns out that dealership is doing lease business with U.S. Bank. But he admitted that the residual value would be a lot more realistic than it was two years ago, which means the monthly payments would be higher.

No doubt.

"Or the customer could buy his current truck," he said. "We'd rather sell a new one but want to keep the customer happy."

Given the high residual value, that would be expensive, I mused.

"It would depend on the lease-end payoff amount," he said. "Give me a number."

OK, I thought. Off the top of my head, let's say, $22,027.33. Ouch! I knew no one in his right mind would pay that much for a 2-year-old pickup, even an incredibly masculine, Hemi-powered 2006 Ram 1500 SLT Quad Cab 4x4 short wheelbase in beautiful Patriot Blue that has fewer than 9,000 miles.

"No problem," the consultant said.

He explained that Chrysler Financial has something called the Preferred Lessee Purchase Price -- or PLPP for short -- that could knock several thousand dollars off the payoff amount.

Give me a number, I said.

He dialed up Chrysler Financial and came back with it: $18,127.33.

That's still too much to pay for a 2-year-old pickup, I told him. Heck, you can buy one for a lot less at almost any used-car lot.

He allowed as how, yes, you probably could … but you wouldn't know who had driven that other truck or how it was cared for.

But I was on a roll.

It's obvious that Chrysler Financial is faced with eating the huge difference between the residual value and what the truck fetches at auction and wants to entice the hypothetical customer to take a bite of it, too.

How clever!

The sales consultant shrugged his shoulders.

He thought for a minute, then asked, "Have you thought about a Dakota?"

[jlj3394]

Dealer is just trying to make some dough.

To me, the Big 3's dealer networks are a huge part of the problem. Many of them are poorly run and don't mind screwing someone to make a quick buck. There are simply too many to police.

[evomind]

yeah....sounds like a dealership issue to me rather than chrysler corporate.

[Vampyre]

Another reason to buy the car instead of renting it... No hassle when you own it....

hope it works out for him....

[Icedog_16]

Assuming it's a closed-end lease (and it should be), his buyout is the residual price plus whatever taxes and fees apply - period. I'd definitely be looking over my lease to show the dealership where they're wrong. I doubt there's a clause that would allow Chrysler to arbitrarily change the buyout as I'd think most courts would see that as being unconscionable and enforce the contract as originally accepted.

[Allan Gibbs]

Originally Posted by Icedog_16

Assuming it's a closed-end lease (and it should be), his buyout is the residual price plus whatever taxes and fees apply - period. I'd definitely be looking over my lease to show the dealership where they're wrong. I doubt there's a clause that would allow Chrysler to arbitrarily change the buyout as I'd think most courts would see that as being unconscionable and enforce the contract as originally accepted.

+1. If it's a close end lease, then take it to another dealership as that dealers thinks your friend is a fool and is trying to screw him.

[Dmbrown34]

Didnt think here was any rule about which dealership you return the leased car.

Try another one and hear their story. I could be a new guy who has no idea what hes talking about.

[fishguy]

a contract is a written agreement for terms of business.
if its in the contract they cannot change the terms after the fact. perhaps there is something you are not seeing in the contract.............?
otherwise make thses guys give you what the contract says.
period w/o exceptions.

[cornbeef]

he does have a closed end lease and like you guys is guessing the dealership is trying one on, he does have a few months left to look into it further but it has left him with a bad taste. it just amazes me that a company (or a dealership) would be trying to scare customers away considering the current market.

[ivan1]

Is he in PA? send him to Wallabyguy for a Mazda or one of the other brands his dealership sells....he wont get ripped off....