Past Sales Growth May Have Adverse Effect on Ford
Following Post-Recession Growth, Blue Oval is Facing Potential Trouble with Profits
A recent Bloomberg article alludes to a forthcoming downward trend in profits for Ford, as many a flurry of used cars will soon be hitting the market. In many ways, this is the result of too much of a good thing for Ford, which has seen sales increase in recent years. That now comes full circle as customers are looking to offload their used cars in bigger numbers. Specifically, lessees could be most to blame.
Bloomberg says that 3.36 million car buyers will be ending their leases in 2017, a bump up from 2016, which saw a drastic 33% increase. The influx of leased cars adds to the saturation of the used car market, potentially taking away from new car sales, or at least lowering prices.
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Ford might not be the only car maker at risk, however. Regardless of brand, leases are a very popular option for many buyers, making things a bit muddy. When a leased car is returned, the dealer then has to assume the value of the return as a used car. Because used car depreciation is higher than usual at 23%, this has become a more arduous process, with less bang for the dealer’s buck.
One possible strategy to combat the likely hit in profits is an increase in certified pre-owned vehicles offerings, which are essentially used cars with warranties attached to them. However, that is likely to only help with differing the problems, not fixing them.
The future is not necessarily certain for Ford and other car makers, although a combination of cutting back on leases and rearranging sales on dealer lots will likely be the cure to this impending crisis. Maybe this is just more added motivation to bring autonomy to the future. Only time will tell.