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How Financial Services Complement Ford’s Automotive Business

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Oct. 27 2017, Updated 6:23 p.m. ET

Sources of revenue

Previously in this series, we looked at how Ford Motor Company (F) has come a long way after beginning its journey in automobile manufacturing.

Now we’ll take a look at the company’s major sources of revenue. Ford’s major business is automobile and auto parts manufacturing, but it’s also involved in the financial services business.

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Automotive business

Under Ford’s automotive business, it manufactures passenger vehicles, vehicle components, service parts, and accessories. The company sells its vehicles under two major brands: Ford and Lincoln. This business also includes the servicing of vehicles.

Being one of the oldest companies in the business, Ford has a very strong dealership network around the world to channel sales. Currently, Ford has a network of ~12,000 dealerships globally.

Ford’s automotive business (FXD) accounts for the majority of its revenue. For 2015, automotive business contributed 94% of total revenue.

Financial services business

Through the financial services arm of its business, Ford offers a range of automotive financing products to its customers and dealers. This includes credit facility to purchase new and used vehicles and lease contracts for consumers.

Apart from financing facilities for consumers, Ford’s financial services business also provides financial help to its dealers in the following manners:

• financing the purchase of vehicle inventory (floorplan financing)
• providing loans to dealers to meet working capital needs
• providing loans for the improvement of dealership facilities
• financing the purchase of dealership real estate

As noted earlier, Ford targets the masses with the majority of its vehicles, so financing services play a crucial role in attracting more middle-class consumers.

Note that other major automakers such as General Motors (GM), Toyota (TM), and Volkswagen (VLKAY) also provide financing facilities to their customers with their own financial services arms.

Continue to the next article to read about Ford’s key geographical markets.

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