Mach-E Financing and RCL Leasing Program Announced

[malba2366]

I'm sorry, but maybe I missed something. Where did you see that Ford was pocketing the tax credit in a lease transaction?

The buyer of the car gets the credit...in a lease the Buyer is the bank that is purchasing the car so the bank is entitled to the credit (for the purpose of this thread the bank is Ford credit). Most automaker captive finance companies pass this on to the buyer through a cap cost reduction. From the posts of people who seem to be in the know, Ford Credit has chosen to retain the credit and boost the residual. This is a bad deal for the leasee because now the buyout is inflated should the leasee chose to purchase the vehicle.

On top of this, the interest rate is terrible. All in all the lease is way overpriced. I think this will quickly change once the initial preorders are sold and they actually have to compete for sales.

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[kdryden99]

The credit isn’t meant to lower the price. The credit is a mechanism for distributing federal support for companies‘ investment in bringing EVs to market.

The price for my ER AWD Premium is $48,700. I am paying 56,200 and recovering 7,500, netting out at 48,700. I fully expect Ford to reduce the price of the MME (all other variables remaining constant) by $3,750 when the credit is reduced by half.

Ford is collecting the price of the car and 7,500. Eventually it will collect the price of the car and 3,750.

I find interesting that for you its portrayed as such whereas for us its opposite. Its help motivate buyers to switch to EV's. Maybe this is the reason as Canadians we get screwed on the price.

 

[JTK44]

What part of "It's in the residual" don't you understand? ? Maybe this will help. The lease payment is based on the difference between purchase price and residual. You can state it as (MSRP - $7500 - Residual) or you can state it as (MSRP - (Residual + $7500)). It's no more complicated than (10 - 6 - 2) = 2 = (10 -(6 + 2)). Same thing. Just a matter of where you put the parenthesis.

It does make a difference if you want to keep the car after the lease period. In this case go with Options. With Options you even get more of a discount.

At the end of the day if the MME is competitive with the Model Y with the tax credit subtracted from the purchase price it's competitive with the tax credit added to the residual.

Thanks for the math lesson. I forgot how to add and subtract.

I guess you are new to leasing. I have been leasing for over 35 years from Toyotas to Porsche/Mercedes/Audi, Fords and almost everything in between.

A lease is composed of two components:

• Depreciation component: this is equal to the difference between the agreed upon selling price, which includes dealer incentives and discounts, etc. and the residual; and
• Interest component.

I all my years of leasing, which up until now, has not included a BEV, I have never seen a residual, 36 months, 10 miles per year less than 54%. I have had leases that had a residual as high as 62%.

The residual that Ford is proposing of mid 50% is a normal residual. It has absolutely nothing to do with the Federal Tax credit.

If you think that a residual in the mid 50% includes a Federal Tax credit of $7,500 than you are not familiar with leasing.

You wrote:

"At the end of the day if the MME is competitive with the Model Y with the tax credit subtracted from the purchase price it's competitive with the tax credit added to the residual."
​

You are correct:

• A three year, (36 month), 10K per year, Tesla Model Y with zero down, leases for $633 a month.

see: https://www.tesla.com/modely/design#battery

• A MME premium AWD LR with a MSRP of $55,800 including destination charges, assuming a residual of 58% (which is high) and a money factor of .001042 (2.5%) (which is low) leases for $743 a month.

see: https://www.leaseguide.com/mobcalc/#result


Simple subtraction tells me the premium is $110 a month more than the Model Y.

Maybe an additional $110 a month is competitive to you.

To those who know leasing it is not.

 

[malba2366]

I find interesting that for you its portrayed as such whereas for us its opposite. Its help motivate buyers to switch to EV's. Maybe this is the reason as Canadians we get screwed on the price.

Well indirectly the goal is to increase EV purchases, but the Federal tax credit was always designed to give the manufacturers an ability to inc

Thanks for the math lesson. I forgot how to add and subtract.

I guess you are new to leasing. I have been leasing for over 35 years from Toyotas to Porsche/Mercedes/Audi, Fords and almost everything in between.

A lease is composed of two components:

• Depreciation component: this is equal to the difference between the agreed upon selling price, which includes dealer incentives and discounts, etc. and the residual; and
• Interest component.

I all my years of leasing, which up until now, has not included a BEV, I have never seen a residual, 36 months, 10 miles per year less than 54%. I have had leases that had a residual as high as 62%.

The residual that Ford is proposing of mid 50% is a normal residual. It has absolutely nothing to do with the Federal Tax credit.

If you think that a residual in the mid 50% includes a Federal Tax credit of $7,500 than you are not familiar with leasing.

You wrote:

"At the end of the day if the MME is competitive with the Model Y with the tax credit subtracted from the purchase price it's competitive with the tax credit added to the residual."
​

You are correct:

• A three year, (36 month), 10K per year, Tesla Model Y with zero down, leases for $633 a month.

see: https://www.tesla.com/modely/design#battery

• A MME premium AWD LR with a MSRP of $55,800 including destination charges, assuming a residual of 58% (which is high) and a money factor of .001042 (2.5%) (which is low) leases for $743 a month.

see: https://www.leaseguide.com/mobcalc/#result


Simple subtraction tells me the premium is $110 a month more than the Model Y.

Maybe an additional $110 a month is competitive to you.

To those who know leasing it is not.

What people are trying to say is the Ford Credit is retaining the tax credit and using it to subvent the residual (even as such the residual is not very good). Other automaker credit arms (Audi, Jaguar etc) give the leasee the tax credit as a cap cost reduction. Tesla does not have tax credits to worry about.

At the end of the day all of this doesn't really matter, the Mach E lease pricing is terrible.

 

[JTK44]

The buyer of the car gets the credit...in a lease the Buyer is the bank that is purchasing the car so the bank is entitled to the credit (for the purpose of this thread the bank is Ford credit). Most automaker captive finance companies pass this on to the buyer through a cap cost reduction. From the posts of people who seem to be in the know, Ford Credit has chosen to retain the credit and boost the residual. This is a bad deal for the leasee because now the buyout is inflated should the leasee chose to purchase the vehicle.

On top of this, the interest rate is terrible. All in all the lease is way overpriced. I think this will quickly change once the initial preorders are sold and they actually have to compete for sales.

In a lease the lessor, Ford Financial credit is the owner and they, and not the lessee, the buyer ,gets the Federal Tax Credit.

You are correct: In most leases the Federal Tax Credit of $7,500 is passed onto the buyer in the form of a cap cost reduction. In the Ford lease it is not: it is kept by Ford Financial.

Ford would not be the first to do this: The original leases on the Model S, the Federal Tax credit was kept by Tesla and that is why the leases were terrible and few were leased.

Keep in mind that in an ordinary lease, 36 months, 10K miles per year, the residual, without any Federal Tax Credit, , is between 55% and 61%.

It is unheard of for a lease 36 moths, 10K miles per year to have a residual of 50% never mind 44%.

The 44% comes from the Ford Option Plan. This is a "red Herring": The Option plan is nothing more than a deferred purchase plan and imo, a terrible deal.

A balloon of 44% on a deferred purchase plan has nothing to do with a residual in a lease.

 

[JTK44]

Well indirectly the goal is to increase EV purchases, but the Federal tax credit was always designed to give the manufacturers an ability to inc


What people are trying to say is the Ford Credit is retaining the tax credit and using it to subvent the residual (even as such the residual is not very good). Other automaker credit arms (Audi, Jaguar etc) give the leasee the tax credit as a cap cost reduction. Tesla does not have tax credits to worry about.

At the end of the day all of this doesn't really matter, the Mach E lease pricing is terrible.

I must disagree:

The $7,500 was not used to support the residual.

In both Audi and Jaguar the residual is 55/57% plus a cap cost reduction of $7,500 - the Federal Tax Credit, plus dealer incentives.

The mid 50% residual is normal and without the Federal Tax credit.

 

[JTK44]

The credit isn’t meant to lower the price. The credit is a mechanism for distributing federal support for companies‘ investment in bringing EVs to market.

The price for my ER AWD Premium is $48,700. I am paying 56,200 and recovering 7,500, netting out at 48,700. I fully expect Ford to reduce the price of the MME (all other variables remaining constant) by $3,750 when the credit is reduced by half.

Ford is collecting the price of the car and 7,500. Eventually it will collect the price of the car and 3,750.

As the Federal Credit goes to the buyer, I think it is meant to lower the price. By lowering the price, more cars will be sold and the goal of moving from ICE to EV's will be accomplished. This is a national policy decision.

BEV as compared to ICE cost substantially more. Without the Federal Tax Credit, BEV would be a hard sell.

Even with the Federal Tax Credit, they are still more expensive than a similar ICE.

 

[DBC]

I must disagree:

The $7,500 was not used to support the residual.

In both Audi and Jaguar the residual is 55/57% plus a cap cost reduction of $7,500 - the Federal Tax Credit, plus dealer incentives.

The mid 50% residual is normal and without the Federal Tax credit.

You're free to disagree but you're wrong. That's fairly easy to see by looking at the residuals for Options and RCL. What is the residual for Options? What is the residual for RCL? Do the math.

Your examples don't show anything other than Jaguar and Audi are throwing a lot of incentives at their BEVs because sales are below target. Setting an unrealistically high residual is just a way to cut the price without saying you're reducing MSRP.

You can call these incentives anything you want but they are all incentives. GM will toss in $7500 of lease cash if you lease a Bolt. That looks like the tax credit but GM doesn't have any credits. It's just a sales incentive. Whether an incentive is called cap reduction, higher residual, or lease cash, doesn't matter.

But if you want to believe what marketing wants you to believe go ahead, No law against being naive.

 

[kdryden99]

I must disagree:

The $7,500 was not used to support the residual.

In both Audi and Jaguar the residual is 55/57% plus a cap cost reduction of $7,500 - the Federal Tax Credit, plus dealer incentives.

The mid 50% residual is normal and without the Federal Tax credit.

At the end of the day i think we can ALL agree that Ford does not want to see their cars back on the lot unless they get it back for dirt cheap. They are funneling everybody to buy the car and are hiding behind their options plan to do so.

 

[Chiefsfan]

I wonder what the the value of a 3 year old Mach E will be versus a Moddl Y.

 

[JTK44]

You're free to disagree but you're wrong. That's fairly easy to see by looking at the residuals for Options and RCL. What is the residual for Options? What is the residual for RCL? Do the math.

Your examples don't show anything other than Jaguar and Audi are throwing a lot of incentives at their BEVs because sales are below target. Setting an unrealistically high residual is just a way to cut the price without saying you're reducing MSRP.

You can call these incentives anything you want but they are all incentives. GM will toss in $7500 of lease cash if you lease a Bolt. That looks like the tax credit but GM doesn't have any credits. It's just a sales incentive. Whether an incentive is called cap reduction, higher residual, or lease cash, doesn't matter.

But if you want to believe what marketing wants you to believe go ahead, No law against being naive.

The Balloon in the Option plan has, and I repeat, has nothing to do with the residual in a lease.

The Ford Option Plan is nothing more than a straight financing deal with a balloon at the end.

The only "twist" is the ability to walk away form the balloon.

This ability to walk away does not make a financing plan a lease.

Have you ever leased a car? If so look at the residual and divide that by the MSRP. That will give you the percentage. I guarantee you it is not 44%!

That percentage in every car but the MME, without any Federal Tax Credit, is 54% to 61%.

I have no idea what GM is doing with the Bolt: It is not in the same league with the MME. They are dogs that are not selling.

But I do know what other manufacturers are doing with their EV that are priced similar to the MME:

• The residuals are in the mid 50% to 60%
• There is a cap cost deduction of $7,500

I can show you car after car priced in the $50,000 to $60,000 range, with no Federal Tax Credit, ICE, all have residuals in the 54% to 61% range.

Other than the MME, show this forum one car, just one car, that has a residual below 50%, 3 years, 10K miles per year, never mind 44% - except for Italian cars.

So please stop saying that the residual without the Federal Tax Credit is in the low 40%:

That is in error. That is incorrect.

 

[JTK44]

Here’s a dealer leasing tool for some chain of credit unions.

The only 2021 Ford models are Explorer and Ecosport.

It appears the 2021 Explorer Limited 2WD has a 36 month 15,000 mile per year residual of 53%.

Residual calculator

Residuals come from ALG.

Thank you!

Add in 2% for each 2500 miles and you come to 57% for 10K miles per year, 36 months.

This is petty much what I have been posting: the residual on the MME, 3years, 10K miles per year, should be between 55% and 57%.

This is of course without the Federal Tax Credit!

 

[Dudeduke]

Thank you!

Add in 2% for each 2500 miles and you come to 57% for 10K miles per year, 36 months.

This is petty much what I have been posting: the residual on the MME, 3years, 10K miles per year, should be between 55% and 57%.

This is of course without the Federal Tax Credit!

I agree with most of your points and understand that we as early adopters are getting a bad deal if leasing.

I have leased 6 cars and did the final worksheets with dealers for at least 20 cars in last 12 years. A lot of them were BEVs. I have leased 2 BEVs and own one.

Your argument is correct that average residual for a 12k/yr and 36 months lease should be around mid 50s.

As i have bought out my leases i know that initial residual estimate by credit companies is pretty accurate for a ICE.

Things are little different with BEVs. Except for Tesla, every other BEV till date hasn't had a real residual at the 3 year end in the range of 50s%. They more or less end up in 40% - 50% range depending on how their battery's held up. Also how the range was initially and what it average range of a BEV at the end of the term.

Now coming back to manufacturers financials have been and are still giving the inflated residual for BEVs to push their sales to get the EV credits which saves them more money than buying them.

Ford, on the other hand at least for the pre orders and early demand doesn't want to loose that money or even take a flier on that it can complete with Tesla's on their resale values. If they are confident on their product, and they think they have something that can truly complete with tesla should use a similar residual. But they want to play it safe and put that risk on the early adopters because they can with all these pre orders.

If the car holds its value better than ford is predicting in the lease, you can buy and sell right away to make money. If it doesn't you just return it. Most of the time it is less in case of BEVs other than Tesla. So by keeping the residual really low they they are putting all the risk on the buyer.

They will definitely up their residuals in the next MY as demand goes down and competition goes up.

I am in the same situation, i have been debating between, Mache, Model Y and ID4..

I own a model 3 and love it. I wanted to get something different and little more stylish than model y. That is the reason i ordered MME. Another reason was MME should be more affordable with the $7500 credit still available, but with these numbers it surely doesn't look like for the lease.

It would not make a financial sense to lease a MME, unless it is same or preferably less than Model Y period. Unless the lease program details change, I may end up getting ID4 if i want to save money or Model Y if i want a sporty suv.

I guess if a big number of pre-orders start backing out due to these lease numbers, Ford may have to change their residuals and MF sooner rather than later. It may be very different 3 months from now depending on the things go.

To sum it up, i agree they should give initial cap cost reduction by providing a $7500 credit in traditional lease with at least 50% residual and a completive MF. Ford Option is a bad option for people who don't plan to keep their vehicles after the term, due to extra tax that would be payed on the residual in the states that charge a tax.

 

[kdryden99]

It's actually not only a bad deal for those who want to lease its bad for everybody.
Lets say you financed the car, after 4 years of paying the car, you run into some bad luck, you lost your job, you had an accident, divorce whatever. Everybody else's premium ev retained 50% of their value while yours is at 40% because those who took the options plan are selling theirs at 40% or 35%. Ford literally devalued your car. Life is full of changes just look at this year. So if you planned to keep your car but are forced to sell, you wont get much of it back. This should not be the case for such a limited production car and not a premium EV.

 

[JTK44]

I agree with most of your points and understand that we as early adopters are getting a bad deal if leasing.

I have leased 6 cars and did the final worksheets with dealers for at least 20 cars in last 12 years. A lot of them were BEVs. I have leased 2 BEVs and own one.

Your argument is correct that average residual for a 12k/yr and 36 months lease should be around mid 50s.

As i have bought out my leases i know that initial residual estimate by credit companies is pretty accurate for a ICE.

Things are little different with BEVs. Except for Tesla, every other BEV till date hasn't had a real residual at the 3 year end in the range of 50s%. They more or less end up in 40% - 50% range depending on how their battery's held up. Also how the range was initially and what it average range of a BEV at the end of the term.

Now coming back to manufacturers financials have been and are still giving the inflated residual for BEVs to push their sales to get the EV credits which saves them more money than buying them.

Ford, on the other hand at least for the pre orders and early demand doesn't want to loose that money or even take a flier on that it can complete with Tesla's on their resale values. If they are confident on their product, and they think they have something that can truly complete with tesla should use a similar residual. But they want to play it safe and put that risk on the early adopters because they can with all these pre orders.

If the car holds its value better than ford is predicting in the lease, you can buy and sell right away to make money. If it doesn't you just return it. Most of the time it is less in case of BEVs other than Tesla. So by keeping the residual really low they they are putting all the risk on the buyer.

They will definitely up their residuals in the next MY as demand goes down and competition goes up.

I am in the same situation, i have been debating between, Mache, Model Y and ID4..

I own a model 3 and love it. I wanted to get something different and little more stylish than model y. That is the reason i ordered MME. Another reason was MME should be more affordable with the $7500 credit still available, but with these numbers it surely doesn't look like for the lease.

It would not make a financial sense to lease a MME, unless it is same or preferably less than Model Y period. Unless the lease program details change, I may end up getting ID4 if i want to save money or Model Y if i want a sporty suv.

I guess if a big number of pre-orders start backing out due to these lease numbers, Ford may have to change their residuals and MF sooner rather than later. It may be very different 3 months from now depending on the things go.

To sum it up, i agree they should give initial cap cost reduction by providing a $7500 credit in traditional lease with at least 50% residual and a completive MF. Ford Option is a bad option for people who don't plan to keep their vehicles after the term, due to extra tax that would be payed on the residual in the states that charge a tax.

With residuals in the 40% range, or 50% without the Fed Tax Credit, Ford is basically saying that we have no confidence in what that market for a used MME will be in three years.

If this were a $25,000 BEV that would be one thing: But it is not: it is a $50,000 car.

Ford is attempting to shift all the risk to the buyer.

So I ask my self this question: If Ford has no confidence in the resale value of the MME, why should I?

I already have two cars, so the MME is a "want", not a need and I can wait.

For me the problem is exacerbated by the fact that I have ordered the First Edition with its $3,600 "upcharge" vs. the premium LR AWD. IMO, upon resale most if not all of the $3,600 will be lost.

From a economic point of view, the logical thing to do is to wait a year, let the first year production kinks and problems work out and let the market not Ford decide what the correct price of the MME is.

BTW, not that it matters, I own many, many thousands of shares of Ford and I want them to succeed with the MME. On the other hand I want value for my money and as you point out, neither the Option plan nor the lease are competitive.

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