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Management’s Discussion and Analysis of Financial Condition and Results of Operations
28 Ford Motor Company | 2008 Annual Report
While Ford Credit continues to offer leasing to customers who prefer this product, lower auction values and the present
funding environment have made leasing less economical for Ford Credit and for consumers. This has contributed to a
reduction in Ford Credit's lease originations and over time will reduce its residual risk exposure.
U.S. Ford, Lincoln, and Mercury Brand Retail Operating Lease Experience
The following table shows return volumes for Ford Credit's Ford, Lincoln, and Mercury brand U.S. operating lease
portfolio. Also included are auction values at constant fourth quarter 2008 vehicle mix for lease terms comprising about
65% of Ford Credit's active Ford, Lincoln, and Mercury brand U.S. operating lease portfolio (in thousands, except for
percentages):
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7RWDOUHWXUQV     
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0RQWKWHUP      
0RQWKWHUP     
In 2008, Ford, Lincoln, and Mercury brand U.S. return volumes were down 9,000 units compared with 2007, primarily
reflecting a shift in lease term placement mix from 24-month to 36-month in 2006, partially offset by higher return rates.
Auction values at constant fourth quarter 2008 mix were down $2,505 per unit from 2007 levels for vehicles under
24-month leases, and down $1,975 for vehicles under 36-month leases, primarily reflecting the overall auction value
deterioration in the used vehicle market and a shift in consumer preferences from full-size trucks and traditional sport
utility vehicles to smaller, more fuel-efficient vehicles.
2007 Compared with 2006
Details of the full-year Financial Services sector Revenues and Income/(Loss) before income taxes for 2007 and 2006
are shown below:
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      ಧ 
7RWDO 
             
Ford Credit
The decrease in pre-tax earnings primarily reflected a higher provision for credit losses primarily related to the non-
recurrence of credit loss reserve reductions (about $500 million), lower financing margin primarily related to higher
borrowing costs (about $400 million), unfavorable lease residual performance reflected in higher depreciation expense for
leased vehicles (about $400 million), and higher other costs primarily due to Ford Credit's North American business
transformation initiative (about $100 million). These factors were offset partially by lower expenses primarily reflecting
improved operating costs (about $400 million) and lower net losses related to market valuation adjustments to derivatives
(about $300 million).