Buying out a $1 billion lease at a discount to its original asking price will make the Detroit automaker one of the most valuable automakers in the world.
The deal also includes a $2.4 billion buyout of basecamp leases for lease buyouts, a $750 million buyout for its rental vehicle business, and a $300 million buyback of its leasing business.
“This lease buyback is a big win for GM and for lease buyers,” said Bob Doss, GM’s executive vice president for leasing.
“It puts more money in our pockets to invest in our leasing program and it creates a tremendous incentive for more buyers to join our program.”
The new lease buybacks are the second and third largest of their kind.
In addition to leasing, GM has also bought back about $1 trillion worth of vehicles in the past five years.
While the lease buy-outs are big, they don’t provide the same kind of long-term benefits as buying a $100 million house, Doss said.
For example, a lease buy out gives GM some time to refinance the loan.
But in a real estate market where prices have surged over the past few years, it will be a big help.
And GM will continue to make investments in its business and improve its vehicles, DOSS said.
“This is a tremendous step forward for our business, a great step forward to get us back to where we were before the recession, and it’s going to be an ongoing investment for us as we make sure that we continue to grow the brand,” he said.
The purchase of base camp leases will also give GM access to a large pool of leased vehicles that will be leased out to third-party leasing companies that sell their own vehicles.
Basecamp is the largest leasing company in the United States.
It is a subsidiary of General Motors Co. that has more than a million vehicles in service.
GM said it will use the lease purchase to strengthen its relationships with the leasing companies.
General Motors is also buying more than 1.2 million of the Chevrolet Suburban pickup trucks that are the backbone of the brand.
The lease buyups were announced during the third quarter of 2017, when the company sold nearly 7 million vehicles and generated a profit of $7.9 billion.
A number of leases have been sold since then, including a $500 million buy out of a lease in 2019.
Under the lease acquisition, GM will sell lease buy outs to all lease buyers who purchase a Chevrolet vehicle, and the leases will be issued at the original leasing price, rather than at a discounted rate.
That means lease buyers will pay a fixed percentage of the lease price for the first year and then pay more for the following two years.