The sub-prime loans were likely priced correctly and with the expectation of a recession during the 84-month loan term. The problem is leases. They are really

The sub-prime loans were likely priced correctly and with the expectation of a recession during the 84-month loan term. The problem is leases. They are really attractive products for institutions because they get prime-rate buyers to pay sub-prime interest rates on an expensive vehicle. Dealers love them because it's easy to hide BS fees and overcharge people who are shopping on monthly payments. However, it's so easy for a lender to lose their ass on leases. The lenders promise to buy back the car at some fixed price in the future. And finding the right price for a residual is a delicate balancing act, if it's too low then the monthly payments are high and there's likely some missed sales, and if it's too high then the lender has to pay above market value for the car. Last year, the F Series truck sold nearly 900,000 units. Ford doesn't report their lease/purchase breakdown, but I expect it to be at least 50% of sales. Meaning, for every $1,000 their lease residuals fall, they are losing at least $450,000,000 per model year. And that's just looking at their trucks. Not only that, Ford earned that sales money when times were good, then used the profits to pay out dividends and buy back stock. But now, their lending arm has to pay for this mistake when times are bad. Granted, the F Series and other trucks are an outlier. A good selling car (or crossover) moves like 300k a year. But still, I have to imagine that even Rav4s and the like have a lease %. This will be a bloodbath. Edit: for reference, Ford's EBITDA were hovering in the low $10 billion range for the past five years.