Ford Motor Credit Co. reported a 29% year over year uptick in lease return volume to 80,000 vehicles in the second quarter — the highest lease return volume on record dating back to at least 2010 reports, according to its earnings released today.
The captive attributes the surge in lease returns to growth in leasing and higher return rates; 81% of lessees returned their vehicles at lease term in 2Q, up from 77% in the prior-year quarter.
However, lease originations are lower year over year, with an with an 8% decline to 97,000 units. Leases accounted for 22% of retail sales, which is below the industry average of 30%.
Meanwhile, loss severity is rising for the captive. Ford Credit averaged a $10,500 loss on each of the 8,000 vehicles it repossessed in the quarter, up from $9,900 per vehicle in the year-prior period.
Also of note, 60-plus day delinquencies — excluding bankruptcies — reached 0.13% in 2Q, up slightly from 0.12% in the prior-year quarter. Despite the year over year rise, delinquencies were lower than the previous three quarters, and the average Fico of customers increased three points to 744, compared to 2Q16.
Ford Motor Co. reported a net income of $2.04 billion during 2Q — a rise of almost 4% year over year — due only to a surge in profit from Ford Credit, according to the report. Ford Credit had the best quarterly pretax profit since 2011 at $619 million — a 55% increase over the same quarter last year. For 2017, the company expects a full-year pretax profit higher than $1.5 billion, reflecting an improved lease residual outlook, along with higher volume, margin, and a strong cost focus.
Ford Credit would not specify the “cadence of profit” but assured that it will be higher than $1.5 billion, Bob Shanks, the executive vice president and chief financial officer, said during the call, adding that the company expects to see residual values rise over time.