A Closer Look at Ford Credit’s Q3 2018 Performance



Ford Credit

Ford Credit is the financial services subsidiary of Ford Motor Company (F). Ford Credit offers a wide variety of automotive financing services to its dealers and customers. These services include providing financing options to auto buyers to purchase Ford’s new or used vehicles and lease contracts.

Let’s find out how Ford Credit’s third-quarter performance shook out and what that means for the company’s automotive business (XLY).

Ford Credit’s third-quarter performance

In the third quarter, Ford Credit’s net receivables rose 4% to $144 billion from $138 billion in the third quarter of 2017. Continued strength in Ford Credit’s retail financing in all segments was the key factor that drove these receivables higher in the third quarter. The company also noted that during the quarter, its loss-to-receivables fell 9 basis points to 44 basis points compared to 53 basis points in the third quarter of 2017.

Last quarter, Ford’s financial services arm reported a 13% rise in its earnings before taxes to $678 million compared to $600 million a year ago. In the second quarter, Ford Credit also reported a rise of 4.2% YoY (year-over-year) in its earnings before taxes to $645 million.

Positive indications for retail business

Ford sells the majority of its vehicles primarily to auto buyers from a regular income group, unlike Ferrari (RACE). Hence, financing services play an important role in attracting and encouraging these retail consumers to buy its vehicles. A consistent YoY improvement in Ford Credit’s retail financing activities, higher profits, and lower loss-to-receivables can be seen as healthy indications of Ford’s overall retail segment’s growth.

Among other major auto giants, General Motors (GM), Toyota Motor (TM), and Volkswagen (VLKAY) also provide financing facilities to consumers through their own financial services subsidiaries. General Motors, Fiat Chrysler Automobiles (FCAU), and Ferrari are scheduled to release their earnings results in the next couple of weeks.

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