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August 01, 2008 THE GREATER FOOL THEORY – Part II: From the Credit Crunch to the Lease Debacle

by Michael Pistol

To say that the Nihilists are having an open season with the present state of the North American automotive sector is an understatement, to say the least. Not that the doom and gloom peddlers are busy selling you impossible scenarios, it's that the industry itself seems to be mired in a never ending series of misfortunate events. Plunging sales in the US, skyrocketing gasoline prices, the flight to fuel-efficient compact cars, manufacturing layoffs, credit problems for the OEMs and consumer, and now, the lease debacle... But what is making the entire situation so dramatically compelling, is the sheer velocity of the change - never seen before in this industry.
The latest crisis - one that's really rocking the industry, stems from the very concept that we may be beginning to see the end of leasing as a major form of automotive finance.
The issue at hand is not necessarily the (presumed) end of a form of financial transaction, but rather the end of a culture of vehicle ‘ownership entitlement' based more on an elusive credit score, rather than the hard cash.

The Data
As both the consumer and business media have relentlessly covered this story, the details almost don't matter anymore, but it will be worth having a short look at the facts again:

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RESOURCES 2009