Ford CFO: Auto loan delinquencies on the rise

Ford Motor Co. CFO John Lawler on Wednesday said auto loan delinquencies are beginning to rise in what he called a "dynamic" economic environment.

U.S. light-vehicle demand remains strong, though tight inventories in the wake of supply chain disruptions have undermined sales in recent months, driving transaction prices higher as incentives fall. Rising prices and interest rates also are becoming bigger hurdles to new retail sales.

Higher new-vehicle prices generally force consumers to put more money down toward a purchase and/or extend loan terms to keep monthly payments affordable.

Some consumers are getting priced out of the new-car market and shifting to used vehicles.

"We're looking for every data point we can to get a read on where the consumer is and where they're headed, given the inflationary issues, economic pressures," Lawler said at the Deutsche Bank Global Auto Industry Conference. "We are seeing some headwinds when it comes to delinquencies as maybe a leading indicator."

Still, he said the uptick was not yet a concern because delinquency rates have been at historic lows for about the past year.

"It seems like we're reverting back more towards the mean," Lawler said.

Ford Credit CEO Marion Harris, speaking on Ford's first-quarter earnings call in April, noted the marginal increase in delinquencies largely came on the back of strong used-car values, which the company expects to remain strong. A Ford Credit spokeswoman said the automaker's captive finance arm would provide more details at the end of July when it reports second-quarter earnings.

The automaker, Lawler said, remains concerned about rising commodity costs, which it expects to jump about $4 billion year over year. Those rising costs, he said Wednesday, have wiped out the early bottom-line profit Ford made off the Mustang Mach-E crossover.

Still, Lawler said demand for new vehicles is "robust."

He said Ford has an order bank of roughly 300,000 vehicles, as supplies remain tight.

Lower inventory, paired with lower incentives and higher average transaction prices, has the industry in a better position than in previous years should the economy enter a recession, he said.

"It's a completely different environment heading into what could be a potential recession than anything I've seen in the past," Lawler said.