HTZ Hertz Global Holdings Inc

Ford Motor Co. cut earnings expectations for its finance arm next year, the latest sign that falling used-car prices are hurting automotive businesses.

The Dearborn, Mich., auto maker cut Ford Credit's 2017 pretax profit forecast by $300 million to $1.5 billion amid sliding auction values on used vehicles, finance chief Bob Shanks told analysts Thursday.

The used-car values continued falling through September as vehicles coming off leases flooded back to dealerships. Ford previously had said it expected its financing arm to earn roughly the same amount as this year. Mr. Shanks said falling used-car prices are spreading beyond small cars and crossovers, both suffering sales slumps amid lower gasoline prices, and now also affecting larger pickup trucks and sport utilities.

The revised forecast further clouded Ford's financial outlook, though the auto maker reaffirmed expectations to earn $10.2 billion in adjusted pretax profits in 2016. Ford in September had lowered full-year profit expectations by $600 million to account for its recalling vehicles with faulty door latches.

Last week, rental-car firm Hertz Global Holdings Inc. last week reported lower third-quarter profits and cut financial projections amid concerns over falling used-car prices, raising broader concerns for auto makers and dealers already struggling to match last year's auto sales record.

Car companies are bracing for a significant influx of used cars in good condition coming off lease, which could further erode new-car sales by giving shoppers cheaper alternatives. Leased vehicles accounted for about 30% of all cars sold in the U.S. through October, according to J.D. Power.

Unlike vehicles purchased by a buyer using a loan or cash, leased cars are owned by the finance company—often controlled by an auto maker—during the term of a lease, which is typically three years. Pricing is set on the expected value of the vehicle at the end of the term, but auto makers often subsidize the deal to lower the monthly payment.

"As an industry, we have to recognize what's happening with all these vehicles that are coming off lease in the next few years," said Mr. Shanks of Ford.

Ford's financing arm is one of the company's most profitable units and has been growing steadily as the auto industry recovered. But Ford Credit's operating profit fell 21% in the second quarter, driven by an increase in auto-loan defaults and deepening losses on off-lease cars resold at auction for lower values than projected. Ford Credit results improved in the third quarter but Mr. Shanks warned the decline in auction values has been sharper than expected.

GM Financial, the financing arm for Ford rival General Motors Co., is less exposed to declining used-car prices as it only began leasing vehicles last year.

This latest cut to Ford Credit's guidance, meanwhile, comes as the Dearborn, Mich., car maker struggles to keep its profit momentum going after posting record pretax results in 2015. Ford's third-quarter profits tumbled 56% compared with the same period in 2015, hurt by hefty recall expenses, weaker U.S. sales and higher launch costs related to the rollout of a new heavy-duty truck.

Ford expects profits will continue to shrink through next year due to heavy investment in partnerships and acquisitions related to its expansion into transportation services.

Write to Christina Rogers at christina.rogers@wsj.com

(END) Dow Jones Newswires

November 17, 2016 15:35 ET (20:35 GMT)

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