Ford Options...Penalty for Additional Payments?

MachE2021

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So I went with Ford Options and I’m reading the contract and it includes the following regarding prepayment.

Can anyone explain what this means, particularly those who have had these sort of loans before? I can read this a couple different ways since the contract is ambiguous but not defining certain terms.

On the one hand, it sounds like this would only create a penalty of up to $75 if you paid off the car before $75 in interest has accrued.
On the other hand, if this is talking about monthly earned finance charge, then it could mean prepayments would come with a hefty penalty for each one you make, effectively negating the benefit of any such payments.

Thanks!
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louibluey

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Good catch! It certainly sounds like it could be as much as $75 each payment. The "all or part" suggests each payment to me.

I wouldn't mind that kind of service charge as much if it was a one time buyout, either actual early purchase, or refinance with another company.

Related question, for those of us who got the $2,500 incentive for using Ford options, is there any minimum time before you could do a buyout without jeopardizing the incentive?
 

macchiaz-o

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So I went with Ford Options and I’m reading the contract and it includes the following regarding prepayment.

Can anyone explain what this means, particularly those who have had these sort of loans before? I can read this a couple different ways since the contract is ambiguous but not defining certain terms.

On the one hand, it sounds like this would only create a penalty of up to $75 if you paid off the car before $75 in interest has accrued.
On the other hand, if this is talking about monthly earned finance charge, then it could mean prepayments would come with a hefty penalty for each one you make, effectively negating the benefit of any such payments.

Thanks!
1C8480AA-A727-4953-862B-FF5947A2F15B.jpeg
I think it's referring to finance charges you incur from not paying on time, rejected payments, etc.
 
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MachE2021

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So I called Ford Credit and I spoke with a very knowledgeable guy who has worked there for over 20 years and he wasn’t sure what that language means and is going to check into it and get back to me. That’s the first time he’s seen that sort of language.

I also listened to the automated message telling me my payoff amount and it is the loan amount plus only a small amount of accrued interest over the last 2 weeks. So it seems like I could pay off the whole thing now and take advantage of the $2500 credit. But I’m hoping for clarity from Ford on whether there’s any penalty for prepayments and if so, how this operates.
 

mamejunkie

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I think it's referring to finance charges you incur from not paying on time, rejected payments, etc.
That is also how I read it. There are minimum charges ($25/50/75) if you didn't pay the monthly on time.
 

ajmartineau

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This looks promising. Can others reading this "listen" to their payoff and estimate the extra, if any?

Also, can you post more of that contract? I would love to read it before I go in.
 

louibluey

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It might help to see the entire document. Where does that clause come from? Could you give us a URL, or scan the entire sheets?

Reading it literally, the title and first sentence says nothing about late payments. Maybe in context of the page it takes on more meaning or a different meaning.

Anyway, the discussion got me to dig out my Ford Option loan papers.

My "NEW YORK VHICLE RETAIL INSTALMENT CONTRACT" from the day I bought MME, expressly says, "Prepayment: If you pay off your debt early, you will not have to pay a penalty."

There is a separate late payment clause: "Late Payment: You must pay a late charge on the portion of each payment received more than 10 days late. The charge is 7.5 percent of the late amount or $50, whichever is less".

My first Ford credit statement says, "- You may prepay the balance of your Retail Installment Contract, in whole or in part, at any time with no penalty"

These types of clauses may be different from state to state and/or different for different buyers. There still could be some sort of one time processing fee, TBD. If so, they are usually modest, such as to clear the lien on a financed vehicle after it is paid off.

I do not know if any of that applies to the $2,500 incentive for using Ford Options, there may still be a clause somewhere that says you have to keep it for some period of time or forfeit the $2,500, just speculation, I need to research that one.

I just noticed that OP lists "attorney" as occupation. I too am an attorney as one my later careers, but I have not worked in this area (auto contracts, financing contracts), nothing here is legal advice :)
 
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MachE2021

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It might help to see the entire document. Where does that clause come from? Could you give us a URL, or scan the entire sheets?

Reading it literally, the title and first sentence says nothing about late payments. Maybe in context of the page it takes on more meaning or a different meaning.

Anyway, the discussion got me to dig out my Ford Option loan papers.

My "NEW YORK VHICLE RETAIL INSTALMENT CONTRACT" from the day I bought MME, expressly says, "Prepayment: If you pay off your debt early, you will not have to pay a penalty."

There is a separate late payment clause: "Late Payment: You must pay a late charge on the portion of each payment received more than 10 days late. The charge is 7.5 percent of the late amount or $50, whichever is less".

My first Ford credit statement says, "- You may prepay the balance of your Retail Installment Contract, in whole or in part, at any time with no penalty"

These types of clauses may be different from state to state and/or different for different buyers. There still could be some sort of one time processing fee, TBD. If so, they are usually modest, such as to clear the lien on a financed vehicle after it is paid off.

I do not know if any of that applies to the $2,500 incentive for using Ford Options, there may still be a clause somewhere that you have to keep it for some period of time or forfeit the $2,500, just speculation, I need to research that one.

I just noticed that OP lists "attorney" as occupation. I too am an attorney as one my later careers, but I have not worked in this area (auto contracts, financing contracts), nothing here is legal advice :)
Sadly my retail installment contract states that prepayment may c
It might help to see the entire document. Where does that clause come from? Could you give us a URL, or scan the entire sheets?

Reading it literally, the title and first sentence says nothing about late payments. Maybe in context of the page it takes on more meaning or a different meaning.

Anyway, the discussion got me to dig out my Ford Option loan papers.

My "NEW YORK VHICLE RETAIL INSTALMENT CONTRACT" from the day I bought MME, expressly says, "Prepayment: If you pay off your debt early, you will not have to pay a penalty."

There is a separate late payment clause: "Late Payment: You must pay a late charge on the portion of each payment received more than 10 days late. The charge is 7.5 percent of the late amount or $50, whichever is less".

My first Ford credit statement says, "- You may prepay the balance of your Retail Installment Contract, in whole or in part, at any time with no penalty"

These types of clauses may be different from state to state and/or different for different buyers. There still could be some sort of one time processing fee, TBD. If so, they are usually modest, such as to clear the lien on a financed vehicle after it is paid off.

I do not know if any of that applies to the $2,500 incentive for using Ford Options, there may still be a clause somewhere that says you have to keep it for some period of time or forfeit the $2,500, just speculation, I need to research that one.

I just noticed that OP lists "attorney" as occupation. I too am an attorney as one my later careers, but I have not worked in this area (auto contracts, financing contracts), nothing here is legal advice :)
My contracts aren’t nearly as favorable as yours, which is somewhat surprising given how liberal and consumer-protecting CA is. The contracts specifically states that prepayment may come with a charge, but the contract is really strange in its wording and is vague. I’m just really hoping Ford can provide clarity on this. Otherwise I may have to just experiment with a single prepayment and see what happens.
 

buffasnow

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I also listened to the automated message telling me my payoff amount and it is the loan amount plus only a small amount of accrued interest over the last 2 weeks. So it seems like I could pay off the whole thing now and take advantage of the $2500 credit. But I’m hoping for clarity from Ford on whether there’s any penalty for prepayments and if so, how this operates.
FWIW, we have heard a number of times here on the forum that there is no prepayment penalty, but if you pay off the balance of an Options loan before a certain elapsed time (3 months?), the dealer incurs a penalty from Ford Credit (or perhaps does not earn a full portion of their expected profit for arranging a full-term loan). Not sure I have ever seen that from a verified Ford source, but you may want to ask the dealer and act accordingly.
 

eltonlin

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After a few payments, the accrued/paid finance charges (i.e. interest) should be over $75.
 

louibluey

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After a few payments, the accrued/paid finance charges (i.e. interest) should be over $75.
Oh that's interesting, so earned finance charge is probably the accrued interest to that point (?), which will happen quickly, so effectively, they just want you to pay the interest due? That might be the equivalent of no prepayment penalty (if there are no other prepayment charges/penalties).

There must be some finance wizards here, who can explain that cryptic paragraph to us non-finance types.
 
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MachE2021

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After a few payments, the accrued/paid finance charges (i.e. interest) should be over $75.
Ahhh that interpretation makes sense.
 

Gino_A

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I am hoping $75 is the correct "minimum finance charge" for my options contract.
 

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