Poll: Ford Options vs Finance

[macchiaz-o]

If one's plan is to trade it in, in 3 years, would you still pay off the balance or is there a better way?

If you pay off the full balance and then decide to trade after 3 years, it's your car not Ford's. So it's a normal dealer trade or private sale at that point. You lose the option of forgoing the balloon payment because you already paid it.

Instead, Ford Credit will be allowing a one-time extra application of principal that is made in conjunction with modifying them modifying your loan schedule. So, you contact them to arrange this... Send them the extra payment of principal, and they rework the remaining payment schedule to keep the balloon in place.

We don't have a lot of detail on exactly HOW that will work, but my best guess is that they refinance the loan to restart on the date of the modification, with its remaining principal, and with the remaining number of months in the term being held as it was (so the balloon lies at the same date as before).

I worked through this in my own spreadsheet and found that on a 36 month Options loan for my Premium RWD SR, it makes VERY LITTLE difference in the total interest paid.

In my case I am putting down $3,500 on credit card plus the $500 I already deposited during the order process, and am possibly trading in my Fiesta (or I may sell it elsewhere).

Per my own worksheets, it'll cost me about $300-350 in finance charges over the life of the 36 month Options loan. If I make a larger down payment to get to the 30% max that Ford allows, it helps reduce finance charges but by a very small amount.

If I refinance/modify the loan after 3-4 months, again it can help but by an extremely small amount. Definitely not worth doing so (in my opinion).

So for me, since the $1,000 incentive causes my total finance charges to only be about $300 compared to paying with cash, I might do the 36 month Options simply to have that option to get rid of the car if it turns out I hate it and that its resale value has tanked for some reason. I'm not expecting both of these conditions to be true though... So it's most likely a waste of $300.

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[Woeo]

On the other hand, criticizing someone for worrying more about the $9000 is hardly justified.

Criticizing you for being dismissive of sums of many hundreds of dollars as not being worthy of factoring into someone’s calculus of the financial, technological and manufacturing aspects of purchasing a first year product built by a legacy automaker during a pandemic after a shortened development cycle in a period when BEV technologies have been improving at a significant pace with the lure of even greater future gains dangling in every other marketing release while recognizing the unsettled economic prospects currently facing the world is not criticism of your understanding that $9,000 is more than $475.

 

[DaveQ]

What does x plan do for options financing?

 

[generaltso]

What does x plan do for options financing?

Nothing. It essentially just gives you a discounted purchase price. Financing options remain the same.

 

[timbop]

I just have to say that in the current climate of uncertainty there is no way I would part with $50,000 in cash right now. The financing is cheap enough for 3 or 4 years that I'd feel much better to have that cash on hand "just in case".

 

[buffasnow]

Criticizing you for being dismissive of sums of many hundreds of dollars as not being worthy of factoring into someone’s calculus of the financial, technological and manufacturing aspects of purchasing a first year product built by a legacy automaker during a pandemic after a shortened development cycle in a period when BEV technologies have been improving at a significant pace with the lure of even greater future gains dangling in every other marketing release while recognizing the unsettled economic prospects currently facing the world is not criticism of your understanding that $9,000 is more than $475.

No judgement whatsoever on the content, but that is an impressive amount of information in a single sentence! ?

 

[buffasnow]

No judgement whatsoever on the content, but that is an impressive amount of information in a single sentence! ?

And I do keep wavering back and forth on options vs financing, essentially pondering the value of being able to bail after 3 or 4 years. I hope & predict that the MME is a keeper, but no one can know for sure at this point.

 

[Regularmache]

By that logic, why wouldn't you go borrow as much as you possibly can and turn around and invest it? It honestly makes no sense to me why you would go into debt for a car.

Going into debt on a car shouldn't be looked at any different than any other debt.

If I've saved up $50k in cash and can pay for my MachE in cash or borrow that $50k for 1.9% and through investment, I'm getting 8.5%, making 6.5% after paying 1.9%. I would be missing out on that percentage if I used that $50 to pay cash.
Now whether buying a new car at is a financially good decision, that's another thing entirely.

Making money off borrowed money is what every Bank or Credit union, or a myriad of other financial entity have been doing for hundreds of years but it does take education and planning. It's not rocket science but for a large population, Dave Ramseys cash is King is as much about basic spending and budgeting skills that many of us haven't received whether by schools, mentors, parents etc.

 

[VegStang]

Yea, I used to think that cash was the way to go into the dealer to negotiate but on my last vehicle purchase I ended up financing for three months since the dealers all around the state were not offering much off MSRP (nor was the manufacturer) on the particular model. Prior to that I had to finance, usually via 3rd party.

 

[eltonlin]

Based on my calculations, the "breakeven" for a 36month Options plan with a $2500 incentive is around 31 months. So that means if you decide to pay it off before that, you're "saving money" vs paying in cash. Running it through the whole term and paying off the balloon costs a few hundred vs the cash price (not including any additional trade in fee etc), just as @macchiaz-o stated. IMO definitely worth considering given the trade-in flexibility.

 

[macchiaz-o]

I updated my calculator:

https://1drv.ms/x/s!ApbGIUelGmJ-s9hQWdOSPLkXVkpcrA

The significant changes are in the X-plan pricing and the balloon amount for Options.

Based on the dealer invoice that @hybrid2bev recently posted, the plan pricing includes a discount off of the destination and delivery fee ($1100). Previously I was excluding that from the discount calculation.

As someone else suggested, it's more logical that the residual balloon amount is calculated from adusted MSRP (MSRP + residualized options, before any discounts/rebates are applied) rather than the Cash Price. So that is fixed now, too.

You should still consider this to be a rough calculator... Just to help you think through the decision process on your own.

If I lived in one of the $2,500 incentive regions, Ford Options is a NO BRAINER. It's a significant savings over paying cash. The incentive is larger than the financing costs, for someone who will keep the vehicle rather than treating it as a lease.

But I live in a $1,000 offer region... And as it turns out, Options is still a pretty good deal.

For me, 36 month Options is cheaper than 36 or 48 months of 0.9% financing.

48 month Options is about $212 more expensive than 48 months of 0.9% simple financing. So even that is not so bad... since you get the trade-in/return choices similar to a lease.

Anyway, just my thoughts. Your numbers and situations will vary.

 

[DBC]

In my case I am putting down $3,500 on credit card plus the $500 I already deposited during the order process, and am possibly trading in my Fiesta (or I may sell it elsewhere).

You can use a credit card? I never thought a car dealer would do that because of the (relatively) high fees.

For the trade in, in addition to exploring a private sale, another option would be to go to CarMax a couple of days before you pick up the MME and get an offer. It's good for a week and you can use it to evaluate the dealer's offer. If you decide to take the CarMax offer, getting your check only takes an hour or less. In my limited experience the CarMax offer will come in between a private sale and the trade-in. Most states give you a sales tax credit on the trade so that may be a factor you want to look at.

The best way to save money on a vehicle is to buy one on close out and to keep it forever. Obviously I'm not doing at least the first part.

 

[macchiaz-o]

You can use a credit card? I never thought a car dealer would do that because of the (relatively) high fees.

Yep! Every dealer has its own policies, of course. I put $3k of the Fiesta on credit card. That was its dealer's limit. Different dealer this time (and 8 years later) and so this time the limit is $3.5k.

Now that I think about it though, most of us put at least *some* amount of deposit on our cards already. So if my dealer thinks it through, then they'll only let me put another $3k on card since I have $500 already deposited by card.

For the trade in, in addition to exploring a private sale, another option would be to go to CarMax a couple of days before you pick up the MME and get an offer. It's good for a week and you can use it to evaluate the dealer's offer. If you decide to take the CarMax offer, getting your check only takes an hour or less. In my limited experience the CarMax offer will come in between a private sale and the trade-in. Most states give you a sales tax credit on the trade so that may be a factor you want to look at.

Yeah I did this with I bought the Fiesta, too. Got an offer from CarMax and from a dealer that participates in Autotrader's buyer program. Brought both to the Ford dealer.

Ford dealer offered an amount that was below both offers. So I told them no thanks since I had two better offers in writing. They asked about them and then very slightly beat the better offer. AZ offers that sales tax credit benefit that you're describing (though only during a vehicle trade-in and only when the recipient is a car sales business), so that helped, too.

The best way to save money on a vehicle is to buy one on close out and to keep it forever. Obviously I'm not doing at least the first part.

Yeah I'm not good at this, either.

 

[LOEzell]

I updated my calculator:

https://1drv.ms/x/s!ApbGIUelGmJ-s9hQWdOSPLkXVkpcrA

The significant changes are in the X-plan pricing and the balloon amount for Options.

Based on the dealer invoice that @hybrid2bev recently posted, the plan pricing includes a discount off of the destination and delivery fee ($1100). Previously I was excluding that from the discount calculation.

As someone else suggested, it's more logical that the residual balloon amount is calculated from adusted MSRP (MSRP + residualized options, before any discounts/rebates are applied) rather than the Cash Price. So that is fixed now, too.

You should still consider this to be a rough calculator... Just to help you think through the decision process on your own.

If I lived in one of the $2,500 incentive regions, Ford Options is a NO BRAINER. It's a significant savings over paying cash. The incentive is larger than the financing costs, for someone who will keep the vehicle rather than treating it as a lease.

But I live in a $1,000 offer region... And as it turns out, Options is still a pretty good deal.

For me, 36 month Options is cheaper than 36 or 48 months of 0.9% financing.

48 month Options is about $212 more expensive than 48 months of 0.9% simple financing. So even that is not so bad... since you get the trade-in/return choices similar to a lease.

Anyway, just my thoughts. Your numbers and situations will vary.

I’m really impressed with your Excel skills. Great job! I know it’s asking a lot, but how would you feel about adding a column on your first worksheet for us folks considering the RCL?

 

[shutterbug]

You can use a credit card? I never thought a car dealer would do that because of the (relatively) high fees.

Back in the 80's I bought an entire Mitsubishi Galant with a credit card. Dealers have wised up since and imposed limits.

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