Ford Options... How Much Is It Really Going To Cost Me???

[buffasnow]

I have never leased a car before and I am trying to figure out if Ford options is really worth it. I realize there is a $2500 incentive but wIth 2.25% APR and a very conservative residual value estimate from Ford, I worry Ford options might be a more expensive option in the end when compared to purchasing at 0.9 APR and selling it after 3-4 years. Am I missing something?

Even if it costs a bit more for Options over the term/mileage you choose, if you have a horrible experience and want to get out from under the car in 3 or 4 years, Options gives you the ability to just walk away owing nothing rather than sell for the best offer you can get from Carmax or a private sale and hope it's enough to pay off the residual. Only you can determine what that flexibility is worth to you.

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[eltonlin]

Is this for Select trim? In California they should add Clean Fuel Rewards rebate also ($1500) is your dealer is signed for that program. If dealer didn't apply that, you still can apply for it by yourself - just FYI, if you don't know...

Not sure that's true. This updated program is geared for Retailers to claim the rebate after the sale is completed.

 

[supertramp]

Not sure that's true. This updated program is geared for Retailers to claim the rebate after the sale is completed.

Not sure what you mean by "not true" - my dealer added this rebate to my invoice (in my case it is an after tax rebate).

Or you mean the buyer won't be able to claim it? That's might be right - I didn't dig into that - probably because dealer already added that rebate to my invoice.

 

[Malbecman]

Going to back to OP's question. I"m guessing the reason the Options plan for a 56K MachE and your previous lease are similar has to do with the residual value Ford and BMW use for their 2 financial offerings.

Ford is predicting about a ~50% drop in value over the course of the Options plan. ITs a brand new car and no one really knows how well it will hold its value. This is a bigger depreciation estimate than average and you are paying for it.

BMW probably was predicting something more like 65%. This is more closer to the market average for depreciation and BMW probably has price history to back them up. They hope/plan to get that when you turn in the car at the end of your lease and they sell it.

The amount financed is ~$28K so both payments end up fairly similar.



"I'm not completely green when it comes to leasing, but it seems high because when I leased my BMW X5 Hybrid in 2017, the sale price was almost $80,000.00 and yet my payment was only $806.00 per month"

 

[eltonlin]

Not sure what you mean by "not true" - my dealer added this rebate to my invoice (in my case it is an after tax rebate).

Or you mean the buyer won't be able to claim it? That's might be right - I didn't dig into that - probably because dealer already added that rebate to my invoice.

Thanks for the clarification.

A buyer can't request the rebate after purchase is complete. The Clean Fuel Rebate funds are earmarked ultimately to eligible dealers who participate in the program ( I think it is easier to distribute funds direct to a smaller number of dealers vs direct to buyers as had been previously).

 

[Stang68]

Ford options isn't really a lease, it essentially is a finance contract with a guaranteed selling price at the end of the term. If that guaranteed price turns out to be too low you can still extract that additional equity by trading it in on another Ford or buying the car and selling it or trading it in on something else.

And what if the car is worth LESS than the guaranteed selling price?

 

[Malbecman]

And what if the car is worth LESS than the guaranteed selling price?

Than Ford takes the hit...they are guaranteeing you that price. However, they are also using a heavy 50% depreciation rate (more than market average) to cover themselves.

 

[Stang68]

Than Ford takes the hit...they are guaranteeing you that price. However, they are also using a heavy 50% depreciation rate (more than market average) to cover themselves.

Very interesting. Dealer was making it seems like a lease would be the better way to go but I definitely don't think that's the case if this is true about Ford Options. Seems like a no-brainer.

 

[hybrid2bev]

And what if the car is worth LESS than the guaranteed selling price?

You still have your 3 options.

1. Trade it in. Not the best option in this case.

2. Refinance. You could choose to keep the car anyways.

3. Return. Ford Credit will apply a credit equal to your balloon amount towards the remaining principal balance that you owe (regardless of market value). Assuming you've made all of your payments your principal balance should be very close to your balloon amount. You would be responsible for any shortage in the principal plus the disposal fee, plus mileage/wear charges.

 

[Stang68]

You still have your 3 options.

1. Trade it in. Not the best option in this case.

2. Refinance. You could choose to keep the car anyways.

3. Return. Ford Credit will apply a credit equal to your balloon amount towards the remaining principal balance that you owe (regardless of market value). Assuming you've made all of your payments your principal balance should be very close to your balloon amount. You would be responsible for any shortage in the principal plus the disposal fee, plus mileage/wear charges.

Wow, I mean seems like Ford Options is the way to go. It's more affordable monthly for me, allows me to get the $7500 tax credit, and allows me to return the car scott-free.
Thanks for the info.

 

[hybrid2bev]

Wow, I mean seems like Ford Options is the way to go. It's more affordable monthly for me, allows me to get the $7500 tax credit, and allows me to return the car scott-free.
Thanks for the info.

Exactly why I did it too. Options!

 

[Stang68]

You still have your 3 options.

1. Trade it in. Not the best option in this case.

2. Refinance. You could choose to keep the car anyways.

3. Return. Ford Credit will apply a credit equal to your balloon amount towards the remaining principal balance that you owe (regardless of market value). Assuming you've made all of your payments your principal balance should be very close to your balloon amount. You would be responsible for any shortage in the principal plus the disposal fee, plus mileage/wear charges.

And one last question, if I do the 48 month Options plan but end up turning it in at, say, 36 months, then they just value it as a trade-in and I need to make sure that balloon amount is covered, right?

 

[hybrid2bev]

And one last question, if I do the 48 month Options plan but end up turning it in at, say, 36 months, then they just value it as a trade-in and I need to make sure that balloon amount is covered, right?

OK so let's make a distinction here. Turn In vs. Trade In. Assuming in both cases you make all your payments on time and on schedule.

If you did a 48 month Options and decided to Turn it in at month 36, your principal balance will be most likely higher than your balloon payment. A credit will be applied in the amount of your balloon and you will be responsible for the remaining principal balance + disposal fee + mileage/wear.

Simple example with made up numbers to illustrate. Your balloon is $15,000. Your starting balance is $50,000. At the end of 36 months you still owe $25,000 in principal (including the balloon as principal). If you turn it in a credit of $15,000 (balloon) is applied and you are responsible for the remaining $10,000 in principal balance + disposal fee + mileage/wear.

If you did a 48 month Options and decided to Trade it in at month 36. It's just like a trade in on a traditional retail loan. If your trade is worth more than you owe you get the equity. If it's worth less than you owe then you are responsible for the negative equity. No disposal fee or mileage/wear charges on trade in.

Simple example. If at month 36 the vehicle is worth $20,000 and you owe $15,000 then you can keep that extra cash or apply it as a down payment towards your next vehicle. Or if you owe $25,000 you are responsible for the remaining $5,000 (put more cash down or roll the negative equity into the next loan).

 

[timbop]

Wow, I mean seems like Ford Options is the way to go. It's more affordable monthly for me, allows me to get the $7500 tax credit, and allows me to return the car scott-free.
Thanks for the info.

EXACTLY!

Ford added the traditional lease recently due to lots of complaints about not having one. Since you don't get the $7500 AND it limits what you can do at the end of the term, it is the worst of the 3 finance methods IMHO

 

[Stang68]

OK so let's make a distinction here. Turn in vs. Trade In. Assuming in both cases you make all your payments on time and on schedule.

If you did a 48 month Options and decided to Turn it in at month 36, your principal balance will be most likely higher than your balloon payment. A credit will be applied in the amount of your balloon and you will be responsible for the remaining principal balance + disposal fee + mileage/wear.

Simple example with made up numbers to illustrate. Your balloon is $15,000. Your starting balance is $50,000. At the end of 36 months you still owe $25,000 in principal (including the balloon as principal). If you turn it in a credit of $15,000 (balloon) is applied and you are responsible for the remaining $10,000 in principal balance + disposal fee + mileage/wear.

If you did a 48 month Options and decided to Trade it in at month 36. It's just like a trade in on a traditional retail loan. If your trade is worth more than you owe you get the equity. If it's worth less than you owe then you are responsible for the negative equity. No disposal fee or mileage/wear charges on trade in.

Simple example. If at month 36 the vehicle is worth $20,000 and you owe $15,000 then you can keep that extra cash or apply it as a down payment towards your next vehicle. Or if you owe $25,000 you are responsible for the remaining $5,000 (put more cash down or roll the negative equity into the next loan).

Makes complete sense. Thank you for the explanation, appreciate it.
Now I’ll be fully prepared when I go into my dealer in a few months time and they try to talk me into a lease haha

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