Review this deal, my and the dealer's first Ford Options

[Skepteach]

Working out a Ford Options deal on a MME RWD standard battery.

This will be the dealer's first Ford Options financing arrangement, so with that in mind, this is what they're coming up with:
Selling Price: $48,500
Rebate: $1,100
Down Payment: $7,500
Taxes and Fees: $3,251
Rate: 2.25%
Residual after 48 months: $17,945
Payment for 47 months: $595.92

When I plug all the numbers into various auto loan calculators, I'm coming up with a payment of $561 for 47 months, so I think there's an aspect of the balloon payment I'm not understanding regarding how much interest is being applied monthly to the 47 payments I will make.

Right now, the plan is to go to the dealer after work tomorrow (Monday, Aug 9) to finalize everything and take delivery of the car.

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[hybrid2bev]

Working out a Ford Options deal on a MME RWD standard battery.

This will be the dealer's first Ford Options financing arrangement, so with that in mind, this is what they're coming up with:
Selling Price: $48,500
Rebate: $1,100
Down Payment: $7,500
Taxes and Fees: $3,251
Rate: 2.25%
Residual after 48 months: $17,945
Payment for 47 months: $595.92

When I plug all the numbers into various auto loan calculators, I'm coming up with a payment of $561 for 47 months, so I think there's an aspect of the balloon payment I'm not understanding regarding how much interest is being applied monthly to the 47 payments I will make.

Right now, the plan is to go to the dealer after work tomorrow (Monday, Aug 9) to finalize everything and take delivery of the car.

How many miles per year?

Is the $7,500 down payment cash you are paying? (Not the tax credits)

 

[Carmel Mach E Auto]

I just entered the information here:

https://www.thecalculatorsite.com/finance/calculators/carloancalculator.php

and it yields a payment of $594.42, which is within error margin of your quote.

I entered:

Car value: $43,151 ($48,500 - $1,100 - $7,500 + $3,251)
Interest rate: 2.25%
3 Years 11 months
Initial Deposit: $0
Balloon Payment at end: $17,945

 

[Carsinmyblood]

.9% financing is available if you qualify.

 

[Skepteach]

How many miles per year?

Is the $7,500 down payment cash you are paying? (Not the tax credits)

I’ve opted for 12k mi per year, and I’m putting $7500 down since I can get it back in Feb. I made sure I have enough tax liability to qualify for the full amount.

 

[Skepteach]

I just entered the information here:

https://www.thecalculatorsite.com/finance/calculators/carloancalculator.php

and it yields a payment of $594.42, which is within error margin of your quote.

I entered:

Car value: $43,151 ($48,500 - $1,100 - $7,500 + $3,251)
Interest rate: 2.25%
3 Years 11 months
Initial Deposit: $0
Balloon Payment at end: $17,945

Thank you for double checking for me!

 

[Skepteach]

.9% financing is available if you qualify.

Is that through Ford Credit, and for what terms?

 

[RickMachE]

I come up with you paying $53,457 for the vehicle. If you got a 48 month loan at 0.9%, you'd lose $1,000 of that $1,100 rebate, and in total pay $44, 967. Must be missing something.

 

[Carsinmyblood]

Is that through Ford Credit, and for what terms?

Ford credit. Five year pruchase, but other terms may be available.

 

[machefan]

.9% financing is available if you qualify.

For Ford Financing .9%, but 2.25% for Ford Options.

 

[Brofessional]

I come up with you paying $53,457 for the vehicle. If you got a 48 month loan at 0.9%, you'd lose $1,000 of that $1,100 rebate, and in total pay $44, 967. Must be missing something.

The down payment. $52,476 with the $7500 down.

Break even for that ~$1000 difference in 4 years is around 3% returns. That's if you will actually invest the ~$344 you keep every month by going with options. If you are just going to spend the extra money or returns are less than 3% it's cheaper to finance at 0.9%.

Of course having the safety net of Ford being forced to take the car back in 4 years if values tank is also worth something. For example if you think that insurance is worth about $1000, you're essentially even already. Any investment income from Options lower monthly payments is a bonus.

All that being said, I think residuals on Options are far too low, and I don't see it as any sort of meaningful safety net. Instead, I plan to go with Options at the lowest mileage even though I drive much more than that. This maximizes additional investment each month, and at the end I'll either trade in for residual higher than the balloon or purchase outright. As a caveat, GT Options rates are lower at 1.4% making this strategy a bit more advantageous.

 

[Skepteach]

I agree that Options residuals are probably a bit too low, but then again I’m coming off a BMW i3s lease and those residuals are definitely artificially high. For instance, my car’s payoff is just over $37k, and even in today’s crazy used market, I would probably be lucky to get $31k for it.

It would be nice to see Ford put a little more confidence in their first ground up EV, but considering how much non-Teslas usually tank in resale values, I guess I can’t blame them too much.

 

[Skepteach]

Oh, and if it matters, I currently have no intention of keeping the car past the initial 48 months. I’m betting there will be a lot more EV options 4 years from now, considering the state of things 4 years ago.

 

[macchiaz-o]

Working out a Ford Options deal on a MME RWD standard battery.

This will be the dealer's first Ford Options financing arrangement, so with that in mind, this is what they're coming up with:
Selling Price: $48,500
Rebate: $1,100
Down Payment: $7,500
Taxes and Fees: $3,251
Rate: 2.25%
Residual after 48 months: $17,945
Payment for 47 months: $595.92

When I plug all the numbers into various auto loan calculators, I'm coming up with a payment of $561 for 47 months, so I think there's an aspect of the balloon payment I'm not understanding regarding how much interest is being applied monthly to the 47 payments I will make.

Right now, the plan is to go to the dealer after work tomorrow (Monday, Aug 9) to finalize everything and take delivery of the car.

Using my own spreadsheet, I'm coming up with a figure within a dollar or two of what your dealer quoted. Looks good to me.

https://www.macheforum.com/site/threads/poll-ford-options-vs-finance.2883/page-7#post-92089

What you might have been missing in your own calculations was the balloon aspect... Just like most normal loans, you're paying interest on the principal balance with each of your monthly payments. With a balloon, much of the principal payment is deferred until the final month, so your overall principal balance remains higher when interest is being calculated during the term of the loan, so you pay more interest.

With a 48 month 0.9% simple interest loan from Ford Credit, you're monthly payment would be roughly $938.29. The grand total paid for the vehicle+loan would be $52,538 compared to $53,388 paid with the Ford Options setup that you described.

With the 36-month Options, your grand total would be $52,800... Not much more than the 0.9% 48-month loan. Monthly payments would be about $685 months 0-35 and a final payment of $21,340 in month 36 (unless you finance that).

 

[macchiaz-o]

Oh, and if it matters, I currently have no intention of keeping the car past the initial 48 months. I’m betting there will be a lot more EV options 4 years from now, considering the state of things 4 years ago.

Oh.

Yeah Options is a nice option in this case, if you want the "insurance" to hedge against resale values being lower than the "Return" option. In other words, if the $475 disposal fee + excess wear/use fee is less than the balloon amount minus resale value, then you'd return the vehicle to Ford Credit instead of selling it to a third party.

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