Ford Motor Credit Co. saw a continued decline in lease penetration and lease returns but better lease auction prices than expected, according to the company’s fourth-quarter earnings report yesterday.
Lease penetration was down 2 percentage points in the fourth quarter, as compared to the same time a year prior. The continued decline in leasing has helped push 36-month lease return volume was down to 61,000 units compared with 65,000 during the same period the year prior.
Higher than expected auction values drove improvements in lease residuals, according to the report. In the fourth quarter, 36-month lease auction values stood at $17,155, an increase of 2.4% year over year. However, Ford anticipates auction values to decrease by about 4% in 2018 at constant mix, reflecting the captive’s desire to lower lease returns, according to the report.
“[Ford Credit] benefited across broad parts of the business, but certainly [used-vehicle pricing] was a factor,” James Hackett, chief executive of the OEM, said during the earnings call. “For the full year … I think on average to portfolio we saw a decline of about 3%, which as you remember conversations that we had at the beginning of last year, I think is about half or so what we thought was going to happen.”
The average Fico score increased nine points year over year to 750, while 60-plus day delinquencies decreased by three basis points year over year to 0.13% of the portfolio. Charge-offs remained relatively stable at 0.60% of the portfolio — up one basis point from the year prior. Ford Credit’s net receivables were $143 billion, up 10% year-over-year.
Wholesale volume was up 5% in the fourth quarter as compared to the year prior, driven by higher share in the U.S. and a favorable change in dealer stocks, according to the report. Meanwhile, wholesale volume in Asia Pacific decreased by 6% year over year because of lower marketshare in China.
“It was a challenging year in China for us we were down in unit volume,” said Jim Farley, executive vice president and president of global markets. “We were down in unit volume 6%, but as you mentioned the real change in the market was incentives that affected our financials. But the key is that in 2018 in the second half, we start a new wave of product launches in China, and we believe that freshness is going to be really important part of our growth story in China again.”
