Ally Bank, the former GMAC, lowered Chrysler Group's credit-score threshold for its customers to qualify for a vehicle lease from 660 to 620. As a result of this move by Ally, Chrysler's preferred finance provider, the pool of lease customers has become wider. A 660 FICO score is on the lower end of prime, while a 620 score is on the upper end of subprime.
Chrysler sent a memo to dealerships this week, confirming that Ally had revised its minimum score. In addition, dealerships have confirmed the 620 figure.
The reason why this development is such a boost for the carmaker is that a credit score helps establish the interest rate that a bank will charge a customer for a loan. FICO scores fall anywhere from 300 to 850.
In July 2008, Chrysler's leasing business ended when its former captive finance company, Chrysler Financial, departed the leasing business. During this period, the resale value of its pickups and SUVs fell due to elevated gasoline prices. Leases accounted for about 22% of all Chrysler new-vehicle transactions in 2006, when Chrysler Financial was still its captive finance company.
Ralph Kisiel, a Chrysler spokesman, said that soon after Chrysler Financial left the leasing business, together with a majority of Chrysler's lenders, this percentage dropped to under 1% by mid-2009.
Kisiel added that since that time, lenders have resumed leasing and its corporate average has steadily risen to the current 4% to 6%. Kisiel added that the company is taking a disciplined approach to leasing and that it aims to remain competitive by providing numerous financing options.
He explained that leasing will account for less than 22% of sales and that Chrysler is comfortable with the current leasing levels. David Kelleher, owner of David Doge Chrysler Jeep in Glen Mills, Pa., and a member of Chrysler's National Dealer Council, said that dealerships will benefit from this change in extending lease offerings to more customers.