GM returning to leasing with luxury vehicles

General Motors will return to the leasing business focusing on luxury vehicles, but not on a broader basis, Vice Chairman Bob Lutz said.

"We will get back into leasing, but we are not going to use massive subsidized leasing to drive volume because it's volume without profitability," Lutz said July 29 in an interview with Automotive News. "We'd rather sell less at higher profit than sell more at lower profit."

Lutz said it still would make sense for GM to do more leasing on its luxury vehicles.

"The luxury end of the market is very heavy on leasing and as credit frees up, it would be very logical to get back into the portion of the market that we currently don't compete in, which is the lease market," Lutz said.

"If we lease, it is going to be a lease rate that truly reflects the value of the car or truly takes into account the true depreciation level of the car in the first two or three years."

According to reports Tuesday by The Wall Street Journal and Bloomberg News, GM and its lending affiliate GMAC are expected to resume leasing cars as early as Aug. 1 after a year-long hiatus from the leasing market.

Lutz would not comment on the reports, saying he is unsure of when GM might return to leasing. But he emphasized it will be a limited program because it is very expensive for a carmaker to subsidize leasing and leasing tends to erode residual values.

GM spokesman Pete Ternes said GM is still discussing leasing options and no announcement is planned yet.

Demand for leases on a several GM models has increased over the past year, according to statistics from LeaseTrader.com, which tracks activity in the secondary lease market.

"It has always been imperative for GM to reintroduce car leasing programs for the millions of people that see leasing as the best fit for their automotive needs," Sergio Stiberman, CEO of LeaseTrader.com, said in a statement.

"Many of the brands and models in the GM family have increased in popularity in the secondary lease marketplace because leasing remains desirable for so many individuals.

"We're confident GM's decision will result in higher inventory turnover because more options are always beneficial to the consumer and to the health of the industry."

According to LeaseTrader, demand for leases on the Cadillac Escalade has risen 22 percent over the past year. The Buick Enclave was next at 18 percent.

By Jamie LaReau- Automotive News