General Motors Co. and Ford Motor Co.’s finance arms likely face multibillion-dollar losses linked to the dramatic drop in used-vehicle prices, JPMorgan Chase & Co. analysts said.

Prices are falling faster and steeper than JPMorgan was expecting, lead analyst Ryan Brinkman wrote in a report Monday, citing mid-month data from Manheim. The auto-auction firm’s closely watched used vehicle value index plunged 11.8 per cent in the first 15 days of April, a decline that will easily set a record if it holds for the full month.

“The real losers of the development are likely the captive-finance subsidiaries of automakers like GM and Ford, and the rental-car companies,” Brinkman wrote. If prices finish the second quarter 10 per cent lower than envisioned, he estimates losses could total US$3 billion at GM Financial and US$2.8 billion at Ford Credit.

The spread of the coronavirus has caused a major dislocation in the US$1.5 trillion used-car market. Physical auctions have been halted for weeks along with much of the rest of the economy. Once they resume, dealers and rental-car companies are expected to flood them with vehicles to raise cash as they brace for months of lower demand.

“What we’re seeing right now is essentially the market is illiquid -- and that’s the physical auctions as well as the digital auctions,” Jennifer Laclair, the chief financial officer of Ally Financial Inc., said on an earnings call. The lender had been expecting a 5 per cent to 7 per cent drop in used-car values for the year.

“We’re a bit in wait-and-see mode, and we think we’ll have a much clearer sense of used-car prices once shelter-in-place orders are lifted and auction activities can resume more normal levels,” Laclair said.

GM shares traded higher after declining as much as 4.6 per cent in early intraday trading. Ford shares were down 0.6 per cent and Ally was little changed as of 11:45 a.m. in New York.

Vehicle prices are likely going to come under significant pressure in the coming months as rental-car firms including Hertz Global Holdings Inc. and Avis Budget Group Inc. offload far more vehicles than usual, Brinkman said. Hertz shares plunged as much 8.2 per cent, while Avis fell as much as 6.3 per cent.

GM and Ford’s captive-finance companies and Ally are doing what they can to limit their contribution to the glut of used vehicles hitting auctions by offering extensions to lease customers. “That helps to manage the supply dynamics relative to demand and we think that overall positions the market to be stronger,” Laclair said.

--With assistance from Sophie Caronello and Jenny Surane.