Savvy consumers cut Ford Credit’s profit

Blame savvy consumers for declining third-quarter profits at Ford Motor Credit.

Ford didn’t say that, of course. They know better than to blame the consumer for anything. But the numbers back up my assertion.

Ford says the financing arm’s net profits fell 30 percent to $350 million, while pretax profits fell 24 percent to $581 million.

It gave two reasons for the pretax slide: fewer off-lease vehicles that Ford Credit could sell at a gain, and lower credit-loss reserve reductions.

The latter is an accounting issue. But the former reflects consumers’ taking advantage of sky-high residual values for used vehicles.

Ford Credit would love to take back your car or truck when the lease expires, then sell it for more than it had anticipated when it forecast the residual value at the start of the lease. But many consumers are saying, “No, thanks,” and keeping the vehicle.

Whether they continue to drive it or sell it themselves, they’re not letting Ford Credit grab the potential profit.

And we’re talking about a lot of consumers.

During a conference call to discuss the earnings, Ford said that historically about 70 percent of off-lease vehicles come back to the captive finance company. In the third quarter, that number tumbled to just 48 percent for Ford and Lincoln vehicles.