Ford Credit Recoups Less at Auction in 2013

Lower-than-expected auction values spurred a $62 million year-over-year decline in lease residuals, Ford Motor Credit reported today.

Ford Motor Co. Executive Vice President and CFO Robert Shanks said during a call today that auction prices normalized last year after a run-up in 2012 following Hurricane Sandy. “That storm had the effect of creating, if you (will), a little bubble,” he said. “Now the year-over-year basis, we kind of normalized versus that, and so on a comparative basis, you’re seeing a big decline.”

According to Manheim’s Used Vehicle Value Index, the wholesale price of used vehicles was down 0.6% in December.

Overall, Ford Credit’s net income was $1.5 billion for 2013, up from $1.2 billion for 2012.

“The improvement was more than explained by higher volume, primarily in North America, driven by an increase in leasing reflecting changes in Ford’s marketing programs, as well as higher non-consumer finance receivables due to higher dealer stocks,” according to a company release. “Partial offsets were higher credit losses due to lower credit loss reserve reductions in all geographic segments and unfavorable residual performance related to lower than expected auction values in North America.”

For the fourth quarter of 2013, Ford Credit’s net income was $568 million, up $300 million year over year.
In terms of financing revenue, Ford Credit brought in $3.4 billion from operating leases, $2.8 billion from retail financing, $1.5 billion from dealer financing, and $92 million in other financing.