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News

Ford promotion expands family, friend discounts for
employees

Ford Motor Co. is recruiting its employees to drum up business.
Active and retired Ford employees can now offer special discounted
financing rates to 13 friends and family members, up from eight
previously.

The promo is called “Pindemonium,” a play on the PINs that
employees distribute to friends and family to participate in the
program. Anyone who facilitates two sales qualifies for free
membership to the Ford Ambassadors Club.

Bear Stearns looking to acquire Indian
captive

With a clamp on securing licenses to sell financial products in
India, Bear Stearns & Co. is planning to enter the market by
acquisition.

The Economic Times newspaper reported that the investment bank will
pay $22.1m (£11m) for Ford Motor captive Ford Automotive Finance
Co.

“We are in advanced discussions with Ford, but it is too early to
confirm the outcome,” a London-based Bear Stearns spokeswoman
said.

Bear Stearns also intends to invest $24.5m (£12.1m) to start a
financial services company in India, according to the report,
though it already offers a selection of institutional services in
the country.

Auto, credit card securitisations skirt subprime
debacle

Demand for vehicle- and credit card-backed securitisations
remained relatively strong last week, despite dwindling investor
appetite in the home-loan space.

New issuance in the auto, credit card, and student loan markets has
slowed somewhat over the past few weeks, but credit quality remains
strong, said Kevin Duignan, a managing director in the asset-backed
securities group at Fitch Ratings.

Meanwhile, investors have completely backed off purchases of
home-loan-backed securities. “Traders would call this a buyer’s
strike,” said Michael Kastner, managing director at Sterling
Stamos. “There is uncertainty about the collateral, and any paper
that comes in is discounted.”
Mortgage- and home equity-backed securitization volume has
plummeted recently, falling to $42bn (£21bn) in July from $80bn
(£40bn) in June.

Analysis

Incentives, residuals prop up lease volume

Steven Marlin and Riley McDermid

Lease volume is slowly inching up, buoyed by automaker
incentives and residuals in line with expectations. “Driven by
manufacturers, leasing volume has moved up,” said Brad Emerson,
president of Vanguard Credit. “We’re seeing some increased
activity.”

 Other lessors nationwide are posting similar growth in
volume. “We are seeing a steady volume of new inquiries, but our
end-of-summer volume is flat,” said Allan Levine, chief operating
officer of Madison Capital, a commercial leasing company that
targets operations with 500 or fewer vehicles in their fleets.
Current lease incentives include low APRs and cash-back options.
For instance, American Honda Motor is offering Acura buyers 2.9%
APRs on 24-month leases; General Motors is touting $1,000 (£500)
cash back or 4.9% on 36-month leases; and Ford  is promoting
$500 (£250) cash-back offers or 0% APRs on 36-month leases.

 “We are definitely seeing [incentives] moving up, with
subsidized lease plans or specials that captives produce, as
opposed to 0% financing, and that definitely increases volume,”
Levine said. At Burnhill Leasing, volume is holding steady, said
president William Brough. The company originates $20m-$30m
(£10m-£15m) of lease a year.

Residuals, too, have been on target so far, many lessors said. In
fact, some lessors contend they may have been too cautious in their
residual-setting after the correction from sky-high projections in
the late 1990s.

“Residuals were way too high a decade ago, and as a result a lot of
people got out of the business,” Brough said. “Now, at least half
of the time we are able to sell the car at a profit. The residuals
have not only corrected themselves, I’d say they are even a little
conservative.”

Despite the subprime mortgage meltdown, leasing volume — and the
underwriting standards that drive that volume — will probably
remain stable. “People who wouldn’t qualify for a loan wouldn’t
qualify for a lease,” Emerson said. For borrowers with worse credit
histories, used-car leasing may gain in popularity.

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