17th
More bank losses?
Image via Wikipedia
While everyone is focused on the Mortgage market that is currently hitting the banks I wonder about another big source of loans that the banks have out which is leased vehicles.
I am not sure of the numbers but a large percentage of the big SUV’s that Americans have been loading up on for the last few years are leased. Banks set lease price based on the cost of capital and the residual value for the car. As many know, used SUV’s have plummeted in value due to high gas prices.
I currently have a Range Rover that is leased in NYC. The lease comes up this January. When the lease is up I will have paid approximately $42,000 to the bank over the last 30 months. My Range Rover which is a 2006 with around 30,000 miles is selling on eBay right now (which would be a retail price) for around $35,000. Banks always get wholesale pricing which is much less then retail, but even if they were to get retail on my car that would amount to $77,000 back to the bank which is less then the check that they had to write to the dealership when I leased it. They will almost for sure lose $10k-$20k on my lease.
I am not sure of the exposure out there for leases but after the mortgage losses additional lease write offs will not be good.
