More leasing woes: Ford Credit takes big hit on trucks and SUVs
Fresh off the news that Chrysler financial will no longer play the leasing game comes word that Ford took a $2.1B charge in the second quarter to offset expected losses from truck and SUV leases. High gas prices have put a huge dent in the truck and SUV market, so when customers turn in their vehicles, their residual value is lower than originally thought and Ford Credit ends up paying the difference. The trucks are fetching less at auction and on dealership used car lots, leaving thousands of dollars that need to be paid by Ford Credit. Ford is also faced with spending more on incentives to subsidize the monthly payments for its truck fleet. Ford's credit arm lost $1.4B in the second quarter, as repossessions and loan defaults also rose due to poor economic conditions. Despite Ford Credit's struggles, the Blue Oval has not said it will discontinue offering leases, which make up 20% of Ford's overall sales, though we've heard some very unsubstantiated rumors that an announcement similar to Chrysler's may come tomorrow.
[Source: Automotive News - subs. req'd, Photo by Bill Pugliano/Getty]
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Reader Comments (Page 1 of 1)
Randy 4:31PM (7/28/2008)
What else can this company endure? They are like Rocky Balboa!
When they're all done making it through this beating they can say "Yo Adrian I Did It"
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Dude 4:34PM (7/28/2008)
Looks like Joe Consumer is the winner here. At least the ones who leased their SUV in the past few years.
Sucks for Ford, but one of the big selling points of the Lease is that you aren't stuck with a car worth less than you owe two years into your five year loan.
For once, the lessee is the winner.
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Randy 11:26PM (7/28/2008)
I didn't even know they lease F150s much!
Roanoke 4:41PM (7/28/2008)
I figured GMAC would follow Chrysler Financial, but it looks like FMC will be second.
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Roanoke 4:50PM (7/28/2008)
Dude, you're right. And smart buyers in the market for a lease need to act fast before the rates/residuals either change or go away on Aug 1st. Many manufacturers offer lease pull-aheads and special incentives to re-lease a car now rather than later. Best time ever to lease if you don't drive more than 15,000 miles per year.
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tanooki2003 4:56PM (7/28/2008)
It sucks for Ford but then again I don't feel a tad bit sorry for them.
Companies should always think ahead in order to prevent catastrophes such as this, especially if it is financial.
Sounds like the once former cash cow SUV's and Trucks have done a complete 180, now costing the company a lot of money. It sucks to be stuck in the legacy era mindset when managing a business doesn't it?
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JD 4:57PM (7/28/2008)
It really is amazing how far reaching the reprecussions of a slow economy can go.
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Chris 5:53PM (7/28/2008)
This isn't about a slow economy, it is about a fundamental shift in the thought patterns of the American consumer.
I actually expect suv/truck numbers to steadily increase next year while never reaching their previous numbers as people adjust to the new fuel prices.
KT 5:02PM (7/28/2008)
Not really news considering it was outlined in last week's Q2 reports.
On the flipside the resale on the cars is up! Some of that may help offset some of the truck/suv losses.
More damage is being done by the extra high number of repo's. Those hurt the most.
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Joshua 5:13PM (7/28/2008)
fords gotta bring in some foreign models in to get the sales up in other segments!!!!
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puzzled 5:41PM (7/28/2008)
It's going to be interesting to see how well Chrysler does. I mean to pull out of leasing all together is really going to hurt sales. I use to sell jeeps.. 90% of our sales were from lease customers. I hate to say it but.. Looks like Chrysler could go bankrupt very soon if they loose that many sales. Ford and GM would be smart to just change the residuals. So you pay more for a lease. But it would still be less than a purchase.
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Benfolio 6:13PM (7/28/2008)
Wow, kudos to the lot attendants that parked the Explorers. Nice straight line guys!
F-Series? Not so much.
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JJ 6:27PM (7/28/2008)
Really puzzled? I sell cars currently as well and while at first it'll hurt yeah...But its not like we only do leasing through Chrysler Financial, hell half of our customers secure leasing through their bank or credit union before even coming in. PLus there are plenty other banks in our neck of the woods we can go through.
Leasing may be a bit more expensive than it was, but i think its high time people get a wake up call and realize you cant just lease a 30k + car/truck for under 200 a month anymore.
As for GMAC... since CF and GMAC are BOTH owned by Cerberus... i wouldnt be surprised if they pull the same stunt.
Saving money is saving money in the long run and i would half to imagine GMAC takes a bigger hit than CF
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msm 7:02PM (7/28/2008)
GM has already announced that leasing is over Aug 1/08.............. 0% 72 months is the game, and on most 09 models too.............I said it first
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CBESSEMER 9:38AM (7/29/2008)
msm is right, GMAC is pulling out, it was actually announced to GMAC employees yesterday, since Cerberus also owns GMAC, it was pretty easy to see coming, Ford will follow, which means barely anyone is going to offer cheap leases anymore, which ultimately is very good for the American Auto Industry
jo 1:00PM (8/02/2008)
Goes around comes around they DESERVE everything they GET!
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