The captive finance arms of General Motors and Ford Motor Co. likely face multibillion-dollar losses linked to the dramatic drop in used-vehicle prices, JPMorgan Chase & Co. analysts said.
Prices are falling faster and steeper than JPMorgan was expecting, lead analyst Ryan Brinkman wrote in a report Monday, citing mid-month data from Manheim. The auto-auction firm’s closely watched used vehicle value index plunged 11.8 percent in the first 15 days of April, a decline that will easily set a record if it holds for the full month.
“The real losers of the development are likely the captive-finance subsidiaries of automakers like GM and Ford, and the rental-car companies,” Brinkman wrote. If prices finish the second quarter 10 percent lower than envisioned, he estimates losses could total $3 billion at GM Financial and $2.8 billion at Ford Credit.
Vehicle prices are likely going to come under significant pressure in the coming months as rental-car firms including Hertz Global Holdings Inc. and Avis Budget Group Inc. offload far more vehicles than usual to adjust to lower demand and raise capital, Brinkman said.
