The U.S. automakers’ inability to finance leases, coupled with high gasoline prices and weak economy, some of the automakers have been taking serious stake in their lease business. Last week, Chrysler LLC announced that its finance arm will stop issuing new car and truck leases to customers by the end of this month.

Now Ford Motor Co. is planning to raise leasing prices on some of models, as the residual value of these particular vehicles is falling so fast. As a result the automaker’s finance arm recorded “extreme losses.”

Ford has already sent a memo to its dealers which 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 automaker will raise prices for the F-150, Super Duty, Ford Explorer and Sport Trac SUVs.

Reportedly, Ford posted the biggest quarterly loss in its history in the second quarter of 2008. The automaker lost $8.7 billion, as the buying trends shifted from gas- guzzling trucks and SUVs towards fuel- efficient smaller vehicles and hybrids. Ford said, out of the total loss, its credit arm took a $2.1 billion pre-tax charge during the quarter because of the drop in the residual value of leased vehicles.

Unlike, Chrysler, Ford is not actively removing from the leasing business when it comes to trucks and SUVs.

Recently, GM has also announced that its finance arm, GMAC Financial Services would stop offering lease incentives to consumers, specially in Canada, which offers lower monthly rates by subsidizing the cost of financing the vehicle. However, it would continue to offer standard lease rates.

This entry was posted on Thursday, July 31st, 2008 at 5:44 am and is filed under Ford. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.