GM: Used-car prices to fall

General Motors said a glut of used cars will return to market after their leases expire and drag on its finance unit this year, following similar warnings by peer Ford and lenders such as Ally Financial Inc.

The prices of used cars in GM Financial's leasing portfolio will decline about seven percent this year, GM Chief Financial Officer Chuck Stevens said on a conference call with analysts Thursday.

The value of used GM vehicles have depreciated faster than expected in the first quarter, particularly with crossovers, and prices will fall as much as three percent next year.

'Leasing became the flavor of the month,” Maryann Keller, an auto industry consultant in Stamford, Conn., said by phone. 'This is a consequence of the behavior we've seen.”

Ford touched off concerns about declining used car prices late last year, when the automaker cut its lending unit's profit forecast by $300 million. The National Automobile Dealers Association's used vehicle price index plunged in February by the most since November 2008, spurring concerns about the fallout for automakers, lenders including Ally Financial and car-rental companies such as Hertz Global Holdings Inc.

When auto lenders lease out vehicles, they charge the customer a monthly payment and make an assumption of the car or truck's value when it will be returned and resold as used. If vehicles are depreciating more than expected, losses can pile up.

Automakers and lenders then may have to begin offering less-attractive terms on new leases.