Industry in trouble when Toyota writes down leases

Industry in trouble when Toyota writes down leases

Filed under: Toyota, Earnings/Financials

Due to a miserable U.S. car market, Detroit automakers are losing billions from lower than expected residuals on leased vehicles. Since the residuals on Motown metal are traditionally below that of the Japanese competition, many industry insiders thought that Toyotas in this country world were immune to the trend. It appears that's not the case. Toyota announced it had to "set aside major reserves for its first quarter to cover losses from vehicle leases in the U.S."

The problem is predictably bad with trucks and SUVs, but other products aren't selling off lease as well as they have in the past. With residuals dropping, used cars are dirt cheap. That gives prospective buyers an affordable alternative to buying a new car. That's bad news for Toyota, but it may even be worse news for everyone else.

Toyota has been making money and gaining market share during these tough times, but even the automotive juggernaut is struggling in today's difficult economic conditions. Including Lexus, Toyota's Daily Sales Rate is down for seven straight months versus prior year numbers, with July missing the mark by 18.7%. This news proves that even Toyota has its share of problems, but what it really shows is that Chrysler may have been on to something when it stopped offering leases.

[Source: BloggingStocks]

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