December 3, 2020

‘Secret weapon’ Ford Credit posts best results since 2005

DETROIT — Ford Credit posted a $1.1 billion profit in the third quarter, up 53 percent from the same period a year earlier as strong auction values helped the lender to its best results since 2005.

Ford Motor Co.’s finance arm, which CEO Jim Farley called a “secret weapon,” helped the automaker to a better-than-expected $2.4 billion net income in a quarter that shattered analyst expectations.

Ford Credit CEO Marion Harris said on an earnings call that the lender benefited from a “pretty big inventory” of used vehicles heading into the reporting period that it was able to sell in an improving market. Auction values rose roughly 7.5 percent to $21,045 per vehicle, compared with $19,585 in the second quarter.

The lender ended the quarter with $31 billion in liquidity, down slightly from the $35.4 billion it had this time last year. Credit loss reserves in Q3 rose 2.2 percent from the prior quarter to $1.3 billion.

Officials expect sequentially lower earnings from Ford Credit in the fourth quarter, driven by what Ford CFO John Lawler called “strong but lower auction values” and lower disposals at auction.

Ford Credit played a key role earlier this year amid the coronavirus pandemic, offering deferral programs and 0 percent financing options. Harris last week said it extended about 11 percent of its retail loan and lease portfolio, and since the spring about 99 percent of those extensions have made a payment.