"Ford Options" Mach-E Lease vs standard lease - similarities and differences

[generaltso]

Speaking of that, has anyone been able to come up with a simple calculator for a Ford Options loan? I've tried, but I can't get my figures to match what the Ford Options page in the Mach E build-your-own website yields - mine always came up low. I searched this forum and found a spreadsheet that claims to do it, but I haven't played with it much because it is very complex. I was trying to create something that just needs total vehicle price, desired balloon amount (in dollars, not in "miles" like the website uses), loan term (typically 36 or 48 months), and outputs total interest paid and monthly payments.

If you're just looking for a simple calculator with balloon, here's one.

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

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[Carmel Mach E Auto]

See the calculator here that @macchiaz-o created.

I think this is the updated version:

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

Thanks, yeah that's the one I had found via a search, but I didn't have much time to investigate it, and it seems to require a lot of nuanced information. I was looking for something really quick and dirty. That's not a criticism at all, by the way. I am certainly appreciative of this individual's effort, and at some point I will make use of this I'm sure.

Yes, or for simpler ones, search for auto lease or balloon loan calculators. There are lots of them online.

I'll try that. I had searched for and used a number of traditional auto loan calculators, but it never occurred to me that balloon calculators existed. I'll check those out and see if the numbers they output jibe with Ford's.

In any case, with a Ford Options loan, when it comes to total interest paid, intuitively, I would have expected it to be the same as a traditional loan for the same amount (which naturally must include the balloon amount in the Ford Options case) over the same term (36 or 48 months). However, that definitely does not seem to be the case. Instead, the total interest paid appears to be somewhat more than a traditional loan. I am still not clear exactly why that is.

 

[macchiaz-o]

with a Ford Options loan, when it comes to total interest paid, intuitively, I would have expected it to be the same as a traditional loan for the same amount (which naturally must include the balloon amount in the Ford Options case) over the same term (36 or 48 months). However, that definitely does not seem to be the case. Instead, the total interest paid appears to be somewhat more than a traditional loan. I am still not clear exactly why that is.

This is because like any interest bearing loan, you are paying interest on the principal balance due. With a balloon loan, you are paying less towards principal every month, deferring a bunch of it until that final payment. So, the principal balance for which you owe interest to the lender remains much higher for most of the term of the loan.

A simplified way to think about it is that you're paying interest twice for that balloon amount. (This isn't literally the case, but it gets you in the ballpark of how much interest to expect.)

It took me a long time to understand how this works... I created my own calculator as a way to force myself to peel the onion and try to make some sense of it for myself.

 

[Carmel Mach E Auto]

If you're just looking for a simple calculator with balloon, here's one.

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

Excellent thank you. This demonstrates my above point about total interest.

Inputing these numbers:

Car value: $69040
Interest rate: 1.4%
Loan term: 4 years
Balloon amount: $26615.20
Down payment: $0

That calculalor tells me my monthly payment should be $940.40.

However, the calculator on Ford's Mach E order site tells me the monthly payment will be $959.85.

To get those numbers from Ford's website I configured a loaded Cyber Orange GT which comes to $70040, but there's a $1000 incentive. I chose a dealership in southeast MI, to get the 1.4% rate (not sure whether that's a regional thing or not). I then chose the lowest mileage possible (7500/yr) which yields the $26615.20 balloon above. And of course the 48 month term.

So I wonder what Ford's calculator is doing, and why reproducing their result is not as simple as one might expect.

 

[Carmel Mach E Auto]

This is because like any interest bearing loan, you are paying interest on the principal balance due. With a balloon loan, you are paying less towards principal every month, deferring a bunch of it until that final payment. So, the principal balance for which you owe interest to the lender remains much higher for most of the term of the loan.

A simplified way to think about it is that you're paying interest twice for that balloon amount. (This isn't literally the case, but it gets you in the ballpark of how much interest to expect.)

It took me a long time to understand how this works... I created my own calculator as a way to force myself to peel the onion and try to make some sense of it for myself.

Thanks for that very helpful reply. I had started replying early before yours came in, sorry about that.

Like you, I really want to understand how this works, hence why all of the investigation. I think once I have the formula in front of my face, I'll get it.

 

[macchiaz-o]

Thanks for that very helpful reply. I had started replying early before yours came in, sorry about that.

Like you, I really want to understand how this works, hence why all of the investigation. I think once I have the formula in front of my face, I'll get it.

The formulas are in that overly complicated spreadsheet.

 

[Carmel Mach E Auto]

The formulas are in that overly complicated spreadsheet.

I was hoping that was the case. So you've got it matching Ford's numbers down to the penny? When I get time I'll have to pick that apart. Like I said earlier, I really appreciate your effort on that, and I definitely plan to use it as a valuable tool.

It does beg the question though, if the online payment calculator cited earlier (or any other out there, presumably) doesn't get the numbers right for a balloon loan, then exactly what good is it? Is it truly junk - truly never the case that a balloon loan would yield those results in real life? Or is just that Ford Options can't simply be thought of as a traditional loan with a balloon payment to begin with? And if not, why not?

 

[macchiaz-o]

I was hoping that was the case. So you've got it matching Ford's numbers down to the penny? When I get time I'll have to pick that apart. Like I said earlier, I really appreciate your effort on that, and I definitely plan to use it as a valuable tool.

It does beg the question though, if the online payment calculator cited earlier (or any other out there, presumably) doesn't get the numbers right for a balloon loan, then exactly what good is it? Is it truly junk - truly never the case that a balloon loan would yield those results in real life? Or is just that Ford Options can't simply be thought of as a traditional loan with a balloon payment to begin with? And if not, why not?

For me, my spreadsheet was calculating a payment that was a few dollars less than actual. For a friend that used it, it was overestimating by $10 or so. No idea why.

Ford also publishes a spreadsheet that salespeople can use to estimate your payments before you get into the real contract paperwork. The Excel estimator that my salesperson sent me a copy of was underestimating by something like $10 a month.

Again, I don't know why... But these will all get you in the right ballpark assuming you are providing correct inputs.

 

[digdug52]

Excellent thank you. This demonstrates my above point about total interest.

Inputing these numbers:

Car value: $69040
Interest rate: 1.4%
Loan term: 4 years
Balloon amount: $26615.20
Down payment: $0

That calculalor tells me my monthly payment should be $940.40.

However, the calculator on Ford's Mach E order site tells me the monthly payment will be $959.85.

To get those numbers from Ford's website I configured a loaded Cyber Orange GT which comes to $70040, but there's a $1000 incentive. I chose a dealership in southeast MI, to get the 1.4% rate (not sure whether that's a regional thing or not). I then chose the lowest mileage possible (7500/yr) which yields the $26615.20 balloon above. And of course the 48 month term.

So I wonder what Ford's calculator is doing, and why reproducing their result is not as simple as one might expect.

A lot of good help in other replies. One thing to remember, your payment over 4 years is 47 normal payments + 1 balloon payment. Use 47 as number of months in the calculator and see if that brings it closer to the Ford web site calculator

 

[Carmel Mach E Auto]

One thing to remember, your payment over 4 years is 47 normal payments + 1 balloon payment. Use 47 as number of months in the calculator and see if that brings it closer to the Ford web site calculator

Thank you so much for pointing that out. Of course that makes perfect sense in retrospect. That gets the number from the generic loan calculator within a few cents of Ford's.

 

[Gino_A]

Close but Options is a simple interest loan not a pre-compute. If you pay more than your normal monthly payment when you get the next months billing statement it will show a lower amount due for that month. I know because I know and because that's what is happening on my loan too, LOL .

When your monthly payment is posted it goes first towards however much daily interest has accrued since you last payment, then the remainder goes toward principal. (assuming there are no late charges due) Then it repeats next month and so on. Interest is calculated daily based on your total principal outstanding balance (which would also include the balloon of course because that's part of the amount financed).

@hybrid2bev on the 4th payment on my options financing, can I pay off all the principle except for the balloon amount? My thinking is that my remaining monthly payments would be the interest only on the balloon amount until the balloon payment is due.

 

[hybrid2bev]

@hybrid2bev on the 4th payment on my options financing, can I pay off all the principle except for the balloon amount? My thinking is that my remaining monthly payments would be the interest only on the balloon amount until the balloon payment is due.

** You'll want to call Ford Credit before you do this and ensure that it's noted that you are are trying to pay ahead and do not want to reschedule your loan. **

Short answer: yes you can pre-pay or pay off early.

Think of Options as basically just like a 60 month simple interest financing loan but instead of 60 payments you have 35 payments and 1 big one. If you pay enough to cover 30+ payments then you'll be paid ahead, but like you said interest will still accrue on the remaining principal balance (balloon). You could do that at any point you don't have to wait until the 4th payment.

 

[Woeo]

@hybrid2bev on the 4th payment on my options financing, can I pay off all the principle except for the balloon amount? My thinking is that my remaining monthly payments would be the interest only on the balloon amount until the balloon payment is due.

I am sure hybrid will answer the question, as he has many times, but your monthly payment will not change by paying extra towards the principal. Paying extra principal will shorten the term of the loan, reducing the overall number of payments, however you would be contractually obligated to continue making payments of the same [agreed] amount. A consequence of paying extra towards the principal is that when you reach the 36th or 48th payment, the balloon payment, the balloon amount owed will be less than if you had not paid extra towards the principal. This is fine, of course, if your intent is to reduce the total amount of interest paid on the loan. If your goal was to keep the balloon high, in the event you wanted to turn the car in rather than keep it, so that Ford would forgive the largest possible amount, then don't pay extra principal.

EDIT: I see hybrid indicated making the payments in advance might be an option with Ford Credit.

 

[hybrid2bev]

I am sure hybrid will answer the question, as he has many times, but your monthly payment will not change by paying extra towards the principle. Paying extra principle will shorten the term of the loan, reducing the overall number of payments, however you would be contractually obligated to continue making payments of the same [agreed] amount.

No, if you pay more than your scheduled monthly payment the next months payment will be reduced.

My first monthly payment was $589.49. Because I like round numbers I have scheduled $600 sent in monthly. $10.51 more than my normal payment. My second monthly billing statement arrived and the payment due was $578.98. ($10.51 less) I paid $600 again.... third payment statement says $568.47 due next month, $21.02 less. And so it goes.

 

[physib]

if you pay more than your scheduled monthly payment the next months payment will be reduced.

If I had a dollar every time you explained this, I would have had enough for an extra monthly payment against my principle, which will reduce the next month's bill

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