Ford Options Deal Structure Estimate

[nhammerschmidt]

I have a bit of a background in auto finance, so I wanted to walk through a potential purchase for everyone here using Ford Options.

I have a 2022 Mustang Mach-E Premium ER on order. The MSRP is $57,140, I live in Ohio and my tax rate is 7%

I have X-Plan and my dealer has agreed to sell it at X-plan.

X- Plan Price: $56,272.20
Doc Fee: $100.00
Sales Tax: $1,111.05 (Ohio taxes on the trade difference so I calculated the tax figuring an estimated trade value of $40,500)
License Fee: $35.00 (Transfer plates from current EV.) Ohio charges a $200 per year surcharge for Plug in vehicles.
Subtotal: $57,518.25
Rebates: -$2,750.00 (Ford Options on the calculator for my region shows $2000 in incentives and I have a $750 PCO resulting from the 2021 to 2022 conversion)
Deposit: -$500.00
Total: $54,268.25

For the sake of simplicity I am going to assume no money down. I drive a ton so I am figuring the options payment at 19,500 miles per year. Based on these parameters, the balloon amount is as follows:

36 months: 40% of MSRP ($22,856.00)
48 months: 33% of MSRP ($18,856.20)

At 2.49% APR (what is showing on the calculator for my region) here are the payments:

36 months: $953.89
48 months: $814.99

Ford offers mileage options at 7500, 10500, 12000, 13500, 15000, 16500, 18000, and 19500. Basically for every mileage band you go down from the 19,500 I put above you add 1% to the percentages I put above. So if you chose 36 months and 7500 miles, the balloon % would be 47%.

When a dealership does a Ford Options contract, there should be a spot in their dealer management system that says "balloon amount" The dealership would simply fill the appropriate balloon amount into that field and the payment should calculate for them and print correctly on their contract. In the payment disclosure section it would read something like this:

35 monthly payments of $953.89 beginning on 2/2/2022
1 payment of $22,856.00 due on 3/2/2025

The paperwork is a standard FMCC installment contract there is no special contract for Ford Options. There is an additional addendum that the dealer has to submit that explains the options at the end of the 36 months:

Keep and pay the balloon in full
Refinance (in some states Ford is REQUIRED to refinance the contract on request from the customer)
Turn back into Ford (Subject to mileage overage, + excess wear and tear charges)

I hope this has been helpful for everyone. Please do not get caught up in the APR or rebates. Those vary by region and individual customer (if you have a private offer). Ford, in the past, has offered incentive protection on ordered units so that you got the better of the rebates at the time of order or at the time of delivery. Many of us ordered a 2021 and had them converted to a 2022. I am not sure that incentive protection works across model years, although I think it would be the right thing for Ford to do.

Let me know if you have any questions.

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[generaltso]

36 monthly payments of $953.89 beginning on 2/2/2022
1 payment of $22,856.00 due on 3/2/2025

You have 1 too many monthly payments.

 

[nhammerschmidt]

You have 1 too many monthly payments.

You are correct. Missed that, thank you. It is corrected.

 

[rohankumar]

You are correct. Missed that, thank you. It is corrected.

Thanks for this, there is another spreadsheet on this forum that you can use for your own reference.
On another note, anyone know what the Ford options plan rates and other specifics are for 2022?

 

[Regulus7]

So basically the real benefit of the options financing plan over a longer term traditional loan is just that you have a lower monthly payment given the smaller amount you are financing. But the residual amount left on the balloon I suppose the question is what will be the value of the car in year 3 or 4 and if the depreciation is much more given new battery technology and all then you have much better outcome versus a traditional lease because you also captured the $7500 tax break plus ford options $2,500. I suppose the problem is there is history here to benchmark what a 2025 Ford new Mach E would cost and what a 3 or 4 year old 2021 Mach E would resell for. If the supply chain issues are still here by then, you could do really well with this plan. Hehe

 

[Neil4Real]

So basically the real benefit of the options financing plan over a longer term traditional loan is just that you have a lower monthly payment given the smaller amount you are financing. But the residual amount left on the balloon I suppose the question is what will be the value of the car in year 3 or 4 and if the depreciation is much more given new battery technology and all then you have much better outcome versus a traditional lease because you also captured the $7500 tax break plus ford options $2,500. I suppose the problem is there is history here to benchmark what a 2025 Ford new Mach E would cost and what a 3 or 4 year old 2021 Mach E would resell for. If the supply chain issues are still here by then, you could do really well with this plan. Hehe

That is not wholly correct. You pay interest on the entire amount, not just the 35 months of payments amount.

Options is ideal if you get the $2,500 rebate because it basically makes it an interest free loan. There is a much longer thread on this, but if you only get the $1,000 rebate and can get a traditional finance interest rate lower than a certain percentage, then traditional financing is the way to go.

The largest appeal to me is that you also have the right to turn in the car instead of paying the balloon, like a traditional lease, so if the car does rapidly depreciate, you're safe. If it appreciates or you want to keep it, you can just sell it or refinance and keep it. Since no one knows how this car will do in a few years, especially since so many more EVs will be out by then and hopefully the MME itself will be much improved, its a much safer bet to go this route and have a safety net. It obviously helps that I got the $2,500 rebate so it also made the most financial sense.

 

[hybrid2bev]

The paperwork is a standard FMCC installment contract there is no special contract for Ford Options. There is an additional addendum that the dealer has to submit that explains the options at the end of the 36 months:

Keep and pay the balloon in full
Refinance (in some states Ford is REQUIRED to refinance the contract on request from the customer)
Turn back into Ford (Subject to mileage overage, + excess wear and tear charges)

I hope this has been helpful for everyone. Please do not get caught up in the APR or rebates. Those vary by region and individual customer (if you have a private offer). Ford, in the past, has offered incentive protection on ordered units so that you got the better of the rebates at the time of order or at the time of delivery. Many of us ordered a 2021 and had them converted to a 2022. I am not sure that incentive protection works across model years, although I think it would be the right thing for Ford to do.

Let me know if you have any questions.

You won't need to sign an addendum if your on a FMCC proprietary contract, but it won't hurt. The FMCC contract has the balloon language already on it. If you a are signing a generic LAW contract then yes, an addendum would be required.

Your choices a the end:
1. Keep it and payoff the loan (all that you owe could be more than the balloon i.e. interest and late charges)

2. You MAY refinance as long as you are not in default of the loan, FMCC is not required to refinance anyone.

3. Turn back into Ford (Subject to mileage overage, + excess wear and tear charges + disposition fee too, though that maybe waived at Ford Credit discretion)

There's a Ford Options payment calculator spreadsheet here:
https://www.macheforum.com/site/threads/poll-ford-options-vs-finance.2883/post-92089

 

[hybrid2bev]

Thanks for this, there is another spreadsheet on this forum that you can use for your own reference.
On another note, anyone know what the Ford options plan rates and other specifics are for 2022?

The January programs are due to be published tomorrow (01/04/2022).

 

[nhammerschmidt]

2. You MAY refinance as long as you are not in default of the loan, FMCC is not required to refinance anyone.

Thats not true, Ford has to refinance the balloon in certain states. More here https://cga.ct.gov/2005/rpt/2005-R-0431.htm

 

[hybrid2bev]

Thats not true, Ford has to refinance the balloon in certain states. More here https://cga.ct.gov/2005/rpt/2005-R-0431.htm

The language on the contract says you may refinance unless you are in default. If you default you are in breach of the contract terms, so your 'Options' may no longer apply.

The contract does not say that a refinance is required to happen no matter what. For example, if the vehicle is seized or you are in bankruptcy then you are in default of the contract (and the banko courts will not legally allow us to refinance at that time anyways). These are extreme examples, in a vast majority of cases we'll happily do a refinance because >98% of customers don't default.

Ford Options is not available in NC, NV, NH or Washington D.C. so some of those don't apply.

 

[nhammerschmidt]

The language on the contract says you may refinance unless you are in default. If you default you are in breach of the contract terms, so your 'Options' may no longer apply.

The contract does not say that a refinance is required to happen no matter what. For example, if the vehicle is seized or you are in bankruptcy then you are in default of the contract (and the banko courts will not legally allow us to refinance at that time anyways). These are extreme examples, in a vast majority of cases we'll happily do a refinance because >98% of customers don't default.

Ford Options is not available in NC, NV, NH or Washington D.C. so some of those don't apply.

Of course a refinance is not required to happen, right to refinance just makes sure that the lender is required to offer it.

I'll give you an example. Customer buys a MME using options in the state of California. They make all of their scheduled payments but when the balloon is due they are unemployed and have no income. Under state law in California, that customer must be able to refinance the vehicle at a payment not substantially higher than the original payment, even though they are unemployed and have no income. Ford cannot deny the refinance and simply take the car back under CA state law. The customer is entitled to a refinance at a similar payment even if it is a loan that Ford would normally decline. The contract language on the installment contract cannot override a state law. The customer may have the option to return the vehicle, but Ford cannot decline a refinance request in a right to refinance state if the customer has made it to the balloon payment in their payment schedule.

So the same unemployed customer in my state (Ohio) which is not a right to refinance state could be declined by Ford for the refinance on the basis of their lack of income which would force the customer to 1.) refinance elsewhere 2.) return the vehicle 3.) pay the entire balance.

You are correct, Ford does seem to know what it is doing with it's underwriting, their contract performance has been stellar as of late. Which makes me happy as a stockholder.

There will be very few instances where something like this occurs, but they can happen.

 

[hybrid2bev]

So the same unemployed customer in my state (Ohio) which is not a right to refinance state could be declined by Ford for the refinance on the basis of their lack of income

LOL maybe. ?
Back in the day when I was a credit analyst I approved many loans where the customer had no proven income. Housewife/Househusbands or trust fund babies and the like.

 

[nhammerschmidt]

LOL maybe. ?
Back in the day when I was a credit analyst I approved many loans where the customer had no proven income. Housewife/Househusbands or trust fund babies and the like.

I did as well. If they've proven they can pay it in the past, they most likely will pay in the future. Note it up and throw out the green arrow.

 

[Socalsp3]

I have a bit of a background in auto finance, so I wanted to walk through a potential purchase for everyone here using Ford Options.

I have a 2022 Mustang Mach-E Premium ER on order. The MSRP is $57,140, I live in Ohio and my tax rate is 7%

I have X-Plan and my dealer has agreed to sell it at X-plan.

X- Plan Price: $56,272.20
Doc Fee: $100.00
Sales Tax: $1,111.05 (Ohio taxes on the trade difference so I calculated the tax figuring an estimated trade value of $40,500)
License Fee: $35.00 (Transfer plates from current EV.) Ohio charges a $200 per year surcharge for Plug in vehicles.
Subtotal: $57,518.25
Rebates: -$2,750.00 (Ford Options on the calculator for my region shows $2000 in incentives and I have a $750 PCO resulting from the 2021 to 2022 conversion)
Deposit: -$500.00
Total: $54,268.25

For the sake of simplicity I am going to assume no money down. I drive a ton so I am figuring the options payment at 19,500 miles per year. Based on these parameters, the balloon amount is as follows:

36 months: 40% of MSRP ($22,856.00)
48 months: 33% of MSRP ($18,856.20)

At 2.49% APR (what is showing on the calculator for my region) here are the payments:

36 months: $953.89
48 months: $814.99

Ford offers mileage options at 7500, 10500, 12000, 13500, 15000, 16500, 18000, and 19500. Basically for every mileage band you go down from the 19,500 I put above you add 1% to the percentages I put above. So if you chose 36 months and 7500 miles, the balloon % would be 47%.

When a dealership does a Ford Options contract, there should be a spot in their dealer management system that says "balloon amount" The dealership would simply fill the appropriate balloon amount into that field and the payment should calculate for them and print correctly on their contract. In the payment disclosure section it would read something like this:

35 monthly payments of $953.89 beginning on 2/2/2022
1 payment of $22,856.00 due on 3/2/2025

The paperwork is a standard FMCC installment contract there is no special contract for Ford Options. There is an additional addendum that the dealer has to submit that explains the options at the end of the 36 months:

Keep and pay the balloon in full
Refinance (in some states Ford is REQUIRED to refinance the contract on request from the customer)
Turn back into Ford (Subject to mileage overage, + excess wear and tear charges)

I hope this has been helpful for everyone. Please do not get caught up in the APR or rebates. Those vary by region and individual customer (if you have a private offer). Ford, in the past, has offered incentive protection on ordered units so that you got the better of the rebates at the time of order or at the time of delivery. Many of us ordered a 2021 and had them converted to a 2022. I am not sure that incentive protection works across model years, although I think it would be the right thing for Ford to do.

Let me know if you have any questions.

Thanks for the break down. I was planning on getting Ford options just for the incentive and pay off asap. How soon would I need to wait before I pay it off in full?

 

[SightUp]

I am in the military. I have never taken advantage of any financial perks outside of the VA before. Anything I should know that would help me with buying a car from Ford or finacing through them? They said the were competitive with every bank but I don't know if I should trust that.

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