Ford to raise lease prices, cites 'extreme losses'

UPDATED: 7/29/08 4:05 pm EDT

Ford Motor Co. will raise prices on leases of trucks and SUVs as their resale values diminish and its finance arm records “extreme losses” on those vehicles, The Wall Street Journal reported today.

The company will price vehicles high enough that consumers wouldn’t be interested in leasing vehicles, according to the report. The newspaper cites a memo Ford sent to its dealers and one dealer who was briefed on the plans.

A portion of the memo reads: “Due to extreme losses Ford Credit is taking on off-lease vehicles, it will be necessary for Ford Motor Credit Co. to adjust residuals midquarter on the following vehicle line,” the newspaper reported.

Messages left for a Ford Credit spokeswoman were not immediately returned.

The changes are effective Friday, Aug. 1, and affect the Ford F-150 and Super Duty pickups and the Ford Explorer and Sport Trac SUVs, the newspaper reported.

One dealer who asked not to be identified told Automotive News that Ford has been curtailing its leasing activity. The automaker is quietly adjusting rebates and rate incentives so the emphasis will be on buying instead of leasing, the dealer said.

The move follows Ford’s disclosure last week that it lost $8.7 billion in the second quarter, its largest quarterly loss in company history. Of that loss, Ford said it took a $2.1 billion pretax charge in the quarter to compensate for declines in the expected worth of full-sized trucks when they come off lease and return to the market.

Ford’s Detroit counterparts also have announced changes to their leasing policies to protect their bottom lines. Last week Chrysler LLC’s finance arm, Chrysler Financial, said it will leave the leasing business next month.

An executive with a U.S. dealership who was briefed on the plan said that GMAC Financial Services, which is minority-owned by General Motors, will stop extending lease deals to consumers with the lowest credit ratings.

Amy Wilson and Reuters contributed to this report

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