Auto dealers urge Ottawa to reject bank-backed leasing

Auto makers have traditionally sided with the dealers and mobilized their considerable lobbying powers against the banks in what has been a 30-year battle. But this round is different, with some auto makers in favour of letting the banks in and others, such as General Motors of Canada Ltd., traditionally a strong and vocal opponent of the banks, saying it no longer opposes the participation of the banks in leasing.

The Globe and Mail
November 25, 2010

Auto dealers urge Ottawa to reject bank-backed leasing
Greg Keenan

CADA.jpg

If Canada’s chartered banks are allowed to participate directly in vehicle leasing they will eventually control the market, the group representing the country’s new vehicle dealers says in a submission to the federal government on potential revisions to the Bank Act.

“The current market framework allows for banks to participate in the lease market, but not dominate it,” the Canadian Automobile Dealers Association (CADA) says in a letter urging the Finance Department to maintain the status quo in vehicle leasing, which keeps the banks out of direct leasing.

The banks, in their submission through the Canadian Bankers Association, are urging Ottawa to change the laws to permit them to enter the vehicle leasing market. They say they will provide “a well-managed and well-capitalized further option in the auto leasing financing marketplace.”

The opposing submissions set up a rematch of what is a bruising battle between the two groups whenever the Bank Act comes up for review, as it does next year.

The CADA surveyed its members about the issue and 84 per cent responded that the existing framework should be maintained, the letter to the Finance Department said.

A split in the ranks of auto makers may give the banks their best chance yet of persuading the federal government to let them enter the leasing market.

Auto makers have traditionally sided with the dealers and mobilized their considerable lobbying powers against the banks in what has been a 30-year battle.

But this round is different, with some auto makers in favour of letting the banks in and others, such as General Motors of Canada Ltd., traditionally a strong and vocal opponent of the banks, saying it no longer opposes the participation of the banks in leasing.

Chrysler Canada Inc. president Reid Bigland told dealers in Florida in September that he approved of letting banks participate. But at a meeting of the company’s dealer council this month, Mr. Bigland backed away from that stance and said he will stay neutral, dealers said.

He has refused to comment publicly on the issue, but Chrysler has said it is focusing on its new program, called Customer Choice Financing, which allows buyers to buy a new vehicle but return it after 36, 48 or 60 months. The difference between that program and leasing is that the consumer, rather than a leasing company, would own the vehicle.

Chrysler no longer has a financing arm through which it is able to offer leasing.

http://www.theglobeandmail.com/report-on-business/auto-dealers-urge-ottawa-to-reject-bank-backed-leasing/article1812396/


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