The auto industry is not just about making cars; it also depends heavily on financing. Ford and General Motors (GM) do more than build vehicles—they also lend money to customers through their finance divisions. This means they manage both the production costs and the loans that help people buy their cars.
When interest rates are low and capital markets are open, this model works well. But it also carries risks. If borrowing costs rise or credit markets tighten due to a recession or other shocks, these companies might struggle to refinance their short-term debts while still holding long-term consumer loans.
Capital Investment Per Vehicle
A key measure of efficiency is how much capital a company invests per car. This includes fixed assets like factories and the loans they provide to customers.
Ford’s capital use is moderate: better than GM but behind Toyota and Subaru. Ford’s higher investment per vehicle reflects its mix of older plants and new factories designed for electric vehicles.
Subaru stands out by keeping its costs low. It outsources customer loans and focuses on a simple product lineup, which helps it maintain a lean financial structure.
Short-Term Debt vs. Long-Term Loans
Ford has the largest debt load among its peers and faces a heavy concentration of debt maturing soon. Almost half of Ford’s debt must be repaid within three years. This forces the company to keep borrowing in short-term markets.
This situation is risky because Ford’s loans to customers last much longer—often more than six years. This mismatch between short-term borrowing and long-term loans is dangerous. It was a key factor in the 2008 financial crisis and the collapse of Silicon Valley Bank in 2023.
Additionally, loan-to-value ratios have increased from 93% in 2020 to about 97.5% in 2024. Longer loan terms and higher loan amounts mean customers may owe more than their cars are worth, increasing the risk of defaults and losses for Ford.
How Do Ford’s Peers Manage This Risk?
Toyota finances internally with a longer debt maturity schedule and strong credit.
GM has similar loan exposure but spreads out its debt maturities better.
Subaru outsources financing, keeping its balance sheet light.
Ally and CACC are lenders with smaller, well-staggered debt loads.
Conclusion
Ford’s combined model of building and financing cars has been profitable but is becoming fragile. With $63 billion in debt due in 2025 and $109 billion by 2027, Ford Credit faces serious risks if short-term funding dries up.
If the economy stays stable, Ford can likely manage its debt. But if credit markets tighten suddenly, Ford’s heavy reliance on short-term borrowing could become a major problem. Investors will need to watch not just Ford’s vehicles but also the financial engine that supports them.
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