Ford didn’t inflate residuals. The residuals used for assumptions about outstanding lease assets were made by wholesale prices and estimates at the time of sale. The write-down reflects the huge shift Ford Credit is seeing at wholesale auctions.

@ Sherma Lin

When companies know they’re going to have a bad quarter, they generally try to estimate their asset losses as largely as possible because expectations are low anyway. My guess is there will be no further write-downs unless there is complete collapse of the economy.

Sherman: yes, for 2-4 years to come.

From what I’ve seen on off-lease ‘gators, a 2005 model (39 month lease) with a residual of $24,000 meets the auction market today at $18,000 or less. Losing $5000 or more per unit is gonna be commonplace. Ouch.

The only thing I fault at this point is the car buyer who couldn’t take the proverbial hint after Katrina and decided to buy an SUV anyway. Oil prices were already headed up and most folks understood that SUV’s were becoming costly propositions in the marketplace.

On a quick note, I do have to give Ford a thumbs up for making the next gen Explorer a car based model. An SUV that gets mileage in the high-20’s should sell decently although the days where these models can become top-10 sellers is long gone.

That’s my pet peeve and its what’s destroying this country in my opinion. It’s not the Republicans, it’s not the Democrats, it’s not the unions and it’s not big business. People have control over their own destiny by simply deferring consumption. They can have a great life and be quite well off and have virtually all the same toys in the long run if they simply sacrifice a little and live within their means in the early part of their life.

Ford has made many mistakes, but lease residuals are based on historical trends. What is catching them out is that the historical depreciation rates for trucks and SUVs suddenly don’t apply to today’s market. Every single bank and finance company which does automotive leasing is getting caught by this sudden market change.

The 2.8 have done a lot of things wrong, but the lease residuals catastrophe is one of the few things that happened to them, not because of them.

Where’s Golden Tongue Bob when you need spin!

If your mortgage jumps 2%, or fuel rises $1/gallon, a lot of people just cannot cope. It is frightening that Americans do not save money, and moreover try to live the maximize lifestyle for their income.

The irresponsibility of some hurts us all.

The reason they are losing money so quickly is because they gave anone with a pulse 0% financing for 72 months on every 06 for close to 2 months.

A credit portfolio heavily based on consumers being able to pay off their bloated SUV loans isn’t quite as bad as subprime housing portfolio, but it is close.