Ford Motor Co. has informed dealers that it is raising the price on leases of its most profitable trucks and sport-utility vehicles due to the "extreme losses" its lending arm is taking on these vehicles.
Meanwhile, GMAC LLC, which is minority-owned by General Motors Corp., has decided to stop extending lease deals to consumers with the lowest credit ratings. The decision affects car buyers who fall in the lowest two of six credit-rating categories, said George Fowler, general manager of Superior Buick Pontiac GMC in Dearborn, Mich.
The move by Ford is expected to make several 2008 model year trucks and SUVs "lease proof," according to the company. In other words, prices will be so high on these leases that consumers won't be willing to agree to terms, according to a dealer briefed on the matter.
In a memo sent via email Monday, Ford officials informed dealers "due to extreme losses Ford Credit is taking on off-lease vehicles, it will be necessary for Ford Motor Credit Company to adjust residuals mid-quarter on the following vehicle lines." The memo was obtained by The Wall Street Journal.
Off-lease vehicles are vehicles that come back to the dealer after a lease has expired. Typical leases run between 24 months and 36 months, although some leases extend longer than that.
"Our business plan always includes a certain amount of leasing to support Ford sales," Ford Credit spokeswoman Brenda Hines said Tuesday. "We don't publicly discuss our leasing forecast."
The changes are effective Aug. 1, affecting the Ford F-150 and Super Duty pickups, and the Ford Explorer and Sport Trac SUVs.
"If you have any customers that want to lease any of [the affected] vehicles, the time is now," the memo said.
Ford's move comes as GM and also Chrysler LLC are tightening vehicle-leasing terms, or backing away from the practice altogether. Chrysler said Friday that its credit arm, Chrysler Financial, will stop financing leases, while GMAC will stop subsidizing leases in Canada.