Blue Oval Staff Posted July 22, 2006 Share Posted July 22, 2006 Click here for the article Quote Link to comment Share on other sites More sharing options...
2005Explorer Posted July 23, 2006 Share Posted July 23, 2006 If Ford needs more money to get things turned around wouldn't it be smarter to sell Jaguar first before they start to part out Ford Credit? It seems like Renault would jump right on Jaguar if Ford would sell it. I know they wanted Volvo, but my guess is Volvo and Mazda would be the last two things Ford would sell. Quote Link to comment Share on other sites More sharing options...
ilovemoney Posted July 23, 2006 Share Posted July 23, 2006 (edited) If Ford needs more money to get things turned around wouldn't it be smarter to sell Jaguar first before they start to part out Ford Credit? It seems like Renault would jump right on Jaguar if Ford would sell it. I know they wanted Volvo, but my guess is Volvo and Mazda would be the last two things Ford would sell. Ford Credit is the cash cow(though not as much lately) that Ford Motor can't afford to lose! heck the picture would have been alot sorrier if those FC profits were not there to prop up FM. Edited July 23, 2006 by ilovemoney Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted July 23, 2006 Share Posted July 23, 2006 Ford credit is better run than GMAC. Like GMAC, they face higher cost of capital, however, they have devised some innovative ways around it, including asset-backed CP (which, essentially, means it's no longer CP). I would say that Ford Credit's cost of capital is probably much lower than GMAC's. Ford Credit is pinched because Ford's sales are falling in a market with rising interest rates. However, as Ford Motor sales stabilize, and as interest rates stabilize, the profitability of Ford Credit will climb again. Quote Link to comment Share on other sites More sharing options...
XCR440SP Posted July 24, 2006 Share Posted July 24, 2006 Ford credit is better run than GMAC. Like GMAC, they face higher cost of capital, however, they have devised some innovative ways around it, including asset-backed CP (which, essentially, means it's no longer CP). I would say that Ford Credit's cost of capital is probably much lower than GMAC's. Ford Credit is pinched because Ford's sales are falling in a market with rising interest rates. However, as Ford Motor sales stabilize, and as interest rates stabilize, the profitability of Ford Credit will climb again. Unfortunately Ford Credit's problems are only going to get worse in the near term. If they have really found creative ways to get their borrowing costs down, they are cheating the customers. Otherwise their costs have made them extremly uncompetive in the current marketplace. Ford Credit's current rates are almost 3% higher than the local banks rates. Its gotten to the point that I'm about emarased to show the Ford credit rates to any customers. Luckly the dealerships have other financing options (low APR specials on New and CPO, and outside bank finance sources) or Ford would be lossing even more market share than they currently are. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted July 24, 2006 Share Posted July 24, 2006 Unfortunately Ford Credit's problems are only going to get worse in the near term. If they have really found creative ways to get their borrowing costs down, they are cheating the customers. Otherwise their costs have made them extremly uncompetive in the current marketplace. Ford Credit's current rates are almost 3% higher than the local banks rates. Its gotten to the point that I'm about emarased to show the Ford credit rates to any customers. Luckly the dealerships have other financing options (low APR specials on New and CPO, and outside bank finance sources) or Ford would be lossing even more market share than they currently are. Weird. Seems odd that Ford Credit would be subsidizing their low APR specials with higher rates on the rest of their loans, seeing how much competition there is for car loans these days (not a day goes buy and Cap One isn't trying to get me to borrow money for a new car). However, the scuttlebutt I keep hearing is that Ford's trying to push 24-36 month leases, and so the high interest rates might be designed to shift people into a lease where they pay rates that are about as high, but don't know (lease factor my eye). Quote Link to comment Share on other sites More sharing options...
XCR440SP Posted July 24, 2006 Share Posted July 24, 2006 Weird. Seems odd that Ford Credit would be subsidizing their low APR specials with higher rates on the rest of their loans, seeing how much competition there is for car loans these days (not a day goes buy and Cap One isn't trying to get me to borrow money for a new car). However, the scuttlebutt I keep hearing is that Ford's trying to push 24-36 month leases, and so the high interest rates might be designed to shift people into a lease where they pay rates that are about as high, but don't know (lease factor my eye). They are pushing some leasing on new, and most new vehicles (even 2007's) have low APR options so the new isn't as much of a problem. However, there are more used vehicles sold than new (3-4 used for 1 new at our dealership) and this is where they are loosing big money since next to no one will pay Ford's rate's. The very few we send are in two groups, the first is very Ford loyal, and the second is the one's that are likely to get repo'd and are refused by other banks (tier of people just above the special finance level). For example Ford's rates on used. 2004-5 MY best rate 8.5%, but if you have a 660-719 credit score and are tier 1 you pay 9.25% 2003 MY best rate 9%, but again if 660-719 credit score and are tier 1 you pay 9.75% 2002 MY best rate 11.5%, 660-719 credit score tier 1 is 12.25% Now we can also get loand through the local credit union. Their rate on a 60 month loan is 6.09% on any 2002-2005. And this rate is offered by several other places in the area so it isn't some special. Compare 6.09% to 12.25% and you can see why Ford Credit is loosing lots of buisiness. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted July 24, 2006 Share Posted July 24, 2006 Compare 6.09% to 12.25% and you can see why Ford Credit is loosing lots of buisiness. Has Ford Credit previously been big into used car loans? I had no idea. Quote Link to comment Share on other sites More sharing options...
XCR440SP Posted July 24, 2006 Share Posted July 24, 2006 They haven't been the cheapest source for used financing in many years, but until the last few they've always been close enough that we'd use them quite a bit since it was conveinent and if they were within 1% it usually made very little difference in payment. This month the only thing we've sent them is low APR new, and CPO units that get 4.9% (but that goes to 5.9% on the 1st). Another thing that I think hurt Ford credit was the Bonus cash. They had a programs for most of the year that paid additional rebate if you financed. Many of our cash paying customers would finance and then pay off the balance 2 weeks later. It had to have cost Ford Credit lots of money to set all this up and then make no interest on it. I guess these stupid rebate programs should suprise me since Ford keeps a never ending list of poorly designed rebates that make selling more work than it should be. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted July 24, 2006 Share Posted July 24, 2006 It was a given that Ford was going to get dropped to junk status 'round about the time of the last restructuring. I think Ford Credit revised their funding systems about then, and went to pretty heavy use of securitized loan portfolios to fund current activity (Ford credit bundles several thousand car loans, and transfers them to a holding company that issues stock, bonds, or both, and transfers the cash raised from this stock or bond offering back to Ford Credit--the cash returned is used to purchase more car loans from you, the dealer). It may be (just hypothesizing here), that Ford Credit found it best to exit the used car loan business, as those loans (for whatever reason) weren't as attractive when securitized. As a side note: securitization is a very easy way for Ford Credit (and GMAC) to sidestep the credit downgrades that they have received from various rating agencies. These loan portfolios routinely carry triple A ratings, and thus allow Ford to pay a relatively low yield on issued securities. This maximizes the interest rate spread, and makes it possible for Ford Credit to continue to fund ongoing activity. Quote Link to comment Share on other sites More sharing options...
XCR440SP Posted July 24, 2006 Share Posted July 24, 2006 It may be (just hypothesizing here), that Ford Credit found it best to exit the used car loan business, as those loans (for whatever reason) weren't as attractive when securitized. I could agree with that except that they are almost as bad on new car loans. They have the 0% and other rates specials that we send them (but I was told that Ford reimbursed them up to the equivalent of 9% APR on thses), but if the customer wants the rebate it is usually better to finance elsewhere. I know one of the local banks was teaching cusomters to finance with Ford credit to get the "Ford Credit bonus cash" offered earlier this year and then they'd refinance them after 30 days a 2% or more interest savings. Quote Link to comment Share on other sites More sharing options...
hoss96racing Posted July 25, 2006 Share Posted July 25, 2006 when I bought my escape used ford credit was the lowest. I almost walked away from the deal untill they tried ford credit.... Quote Link to comment Share on other sites More sharing options...
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