Problem with pre-paying Ford Options lease.

[carbonizedbrett]

Keep in mind that if you live in an area with the $2500 incentive, it will be cheaper to go with Options and pay the whole thing off in a year or two than to do the same with a conventional loan. It would actually even be cheaper than paying cash since the incentive is more than the amount you would pay in interest.

^^^ THIS.

Even if I pay everything on schedule - no pre-payments beyond my deposit/down-payment, I come out ahead of not doing Options. I save $542 over a non-options straight-up purchase. Plus that whole balloon payment can sit in VNJUX for three years!

Cash Price + Fees	$50,602.70
Finance Incentive	-$2,500.00
Amount Financed	$48,102.70
Deposit	-$500.00
Down Payment	-$13,750.00
35 pmts @ $334.67	-$11,713.45
Balloon	-$24,097.20
Total Paid	-$50,060.65

I haven't gotten my first statement yet so I don't know what my payoff (now) amount is, but will follow up when I do.

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[67 Stang Convertible]

Amen, I plan on the .9%@48mo and paying off in around a year or two since I can make more than 1% in the market right now. Options/Leases are a gamble that in the long term is about the same as buying. You win some and loose some. Some people are better at picking the winners than the loosers but Ford seems to be targeting a lower residual than I'd hope for.

Not very familiar to taking auto loans. Whom did you get the .9%@48 mo from?

 

[FPLiptak]

Not very familiar to taking auto loans. Whom did you get the .9%@48 mo from?

Not sure it is still available but I got 0.9% for 3 years through Ford Credit in March when I bought my MME.

Just looked at Ford.com and the 0.9% for 3 or 4 years is available through 07/06/2021.

 

[db4z]

Not very familiar to taking auto loans. Whom did you get the .9%@48 mo from?

Ford APR financing program #21252 if you finance with Ford credit (subject to credit rating, etc.). Regular Mach E is 0.9 for 36, 48 months, 1.9 for 60, 3.9 for 72. Mach E GTs are 1% higher but have a lower Options rate of 1.4% vs. 2.25%. Good through 7/6/21.

Dealers may try quote you a rate from other banks they work with which they get kick-backs from if you don't specifically ask to finance with Ford credit. However, Ford almost always offers an additional cash incentive if you finance with them, which is currently $1000 in my region (program #13970).

I wouldn't expect Ford to change incentives anytime soon (or at least make then worse) for cars that still have reservation orders that aren't fulfilled (i.e. Mach E, Bronco) to prevent backlash from those enthusiastic customers.

 

[Skelton]

It's not what I understood. It's what I was told. I was told I could save interest by prepaying part of the loan. Just like every other loan

You had an understanding from what you were told, but the challenge, regardless of the facts, will be proving what you were told that versus whatever's in the contract you signed. I didn't intent to be insulting, only practical about the situation.

Home Loans and Leases are completely different solutions. You can pre-pay the former to avoid interest, but for *most* leases you're paying the interest regardless. I may be very well be mistaken in my assumption that Ford Options would behave more like a lease. I cannot get complete info from Ford Credit.

Best of luck with this, but I wouldn't fight it too hard. Spin the money into an investment and it'll probably come out better in the long run. As a perk you don't have to fight with Ford and incur the heartburn that will ensue.

 

[Mirak]

You had an understanding from what you were told, but the challenge, regardless of the facts, will be proving what you were told that versus whatever's in the contract you signed. I didn't intent to be insulting, only practical about the situation.

Home Loans and Leases are completely different solutions. You can pre-pay the former to avoid interest, but for *most* leases you're paying the interest regardless. I may be very well be mistaken in my assumption that Ford Options would behave more like a lease. I cannot get complete info from Ford Credit.

Best of luck with this, but I wouldn't fight it too hard. Spin the money into an investment and it'll probably come out better in the long run. As a perk you don't have to fight with Ford and incur the heartburn that will ensue.

Ford Options is not a lease. It’s a balloon financing agreement with an option cobbled onto the back end to allow you to return the car instead of paying the balloon. So it kinda looks like a lease but it isn’t. If you pay down the principal, you owe less interest.

If it was a lease, you wouldn’t be able to claim the federal tax credit. Which is why Ford designed the Options contract specifically for EVs to kinda operate like a lease, without being a lease. And because Options is only used for EVs, there is a lot of ignorance about it - including people at Ford and dealerships.

 

[ARK]

You had an understanding from what you were told, but the challenge, regardless of the facts, will be proving what you were told that versus whatever's in the contract you signed. I didn't intent to be insulting, only practical about the situation.

Home Loans and Leases are completely different solutions. You can pre-pay the former to avoid interest, but for *most* leases you're paying the interest regardless. I may be very well be mistaken in my assumption that Ford Options would behave more like a lease. I cannot get complete info from Ford Credit.

Best of luck with this, but I wouldn't fight it too hard. Spin the money into an investment and it'll probably come out better in the long run. As a perk you don't have to fight with Ford and incur the heartburn that will ensue.

OP is sort of right though, his interest is reduced if he pays down his loan substantially now, just like a home mortgage.

I think part of the issue is a lot of us aren't thinking of the balloon payment as part of the normal loan repayment schedule, but it is. So if the full loan isn’t paid off, interest continues to build from the amount of remaining principal, but less principal still means less interest.

It’s like if someone pays off half of a mortgage or car loan with the first payment - the loan doesn’t just readjust going forward to divide up what you owe by all remaining payments. You still pay your exact same monthly payment, you just reach the finish line sooner.

Those of us who have had the Mach-E for a few months now can verify this on the Ford Credit website - the interest portion of the payment should be getting a little bit smaller and the principal portion getting slightly bigger with later payments (don’t look at first month, it is weird because of the paperwork delay and slightly higher interest that accumulates as a result).

 

[Mirak]

OP is sort of right though, his interest is reduced if he pays down his loan substantially now, just like a home mortgage.

I think part of the issue is a lot of us aren't thinking of the balloon payment as part of the normal loan repayment schedule, but it is. So if the full loan isn’t paid off, interest continues to build from the amount of remaining principal, but less principal still means less interest.

It’s like if someone pays off half of a mortgage or car loan with the first payment - the loan doesn’t just readjust going forward to divide up what you owe by all remaining payments. You still pay your exact same monthly payment, you just reach the finish line sooner.

Those of us who have had the Mach-E for a few months now can verify this on the Ford Credit website - the interest portion of the payment should be getting a little bit smaller and the principal portion getting slightly bigger with later payments (don’t look at first month, it is weird because of the paperwork delay and slightly higher interest that accumulates as a result).

Yup exactly. I did Options to get my $1,000 Options Cash (no $2500 for me) but I’m on a schedule to pay the whole thing off in one year. I’ll be using my $7,500 tax credit next spring, plus a little more, to make the final payoff around March 2022.

I don’t like debt or paying interest, even though I can’t deny the math of getting a far bigger return putting my excess money into this completely irrational stock market of ours.

 

[generaltso]

OP is sort of right though, his interest is reduced if he pays down his loan substantially now, just like a home mortgage.

I think part of the issue is a lot of us aren't thinking of the balloon payment as part of the normal loan repayment schedule, but it is. So if the full loan isn’t paid off, interest continues to build from the amount of remaining principal, but less principal still means less interest.

Right, there will be less interest, but since the monthly payments don't change, the net effect will just be a lower balloon payment. That's not what he wants though if he's planning to turn the car in to Ford Credit at the end. But that's how it works.

 

[Nklem]

Here is essentially how Ford Credit looks at what you want to do.

Again, Options is nothing more than a standard 2.25% car loan at 72 or 84 months, with the remaining principle balance due at the end of year 3 or 4, for what you select.

I ran this on a 4 year options. The one time payment I put it assumes a $50,000 purchase and a $20,000 Balloon. So you pay $30K on day 1, essentially you will be making the full payment towards the Balloon and own the car outright in April of 2024 since this is an installment contract with equal payments.

Since this is not what you intended, put your Prepayment Cash amount $30K in a high rate checking account and have your payments auto withdrawn from it until your Options contract matures in year 3 or 4. I see from a quick search Consumer Credit union pays 2.09%, so you will only have a very very low interest charge.

Good Luck!

 

[MachTee]

With that said it's also possible that the MME is worth more at the end of the term. If that becomes the case the ballon payment might be better paid off and resold afterwards.

I stayed away from options because I didn't want to think about this or deal with teaching the dealer how to process the loan. Probably not the best idea, but I get crazy around having something over my head like total mileage caps.

Don't forget, with Ford Options the buyer gets to the claim the $7500 in federal tax credit. Surely Ford has taken that into consideration. So subtract the $7500 from your balloon payment and it's a hell of a deal, putting the residual at roughly 55%. Plus I already got the $2600 in rebates from Ford

Of course my assumption here is that one can take full advantage of the whole $7500.

 

[Nklem]

Don't forget, with Ford Options the buyer gets to the claim the $7500 in federal tax credit. Surely Ford has taken that into consideration. So subtract the $7500 from your balloon payment and it's a hell of a deal, putting the residual at roughly 55%. Plus I already got the $2600 in rebates from Ford

Of course my assumption here is that one can take full advantage of the whole $7500.

Exactly right!!!! I got the same. I cannot wait until tax time next year........

 

[machefan]

Not very familiar to taking auto loans. Whom did you get the .9%@48 mo from?

Ford Financing, it still in play till 7/7 but suspect it will get renewed as the same.

Tier 0/1 need to qualify

 

[Dustan]

I used the 3 year options plan at the dealer on Tuesday and 3 hours later got to an agreement. They had no clue about the incentive but did allow XPlan. With all the talk about early payments I was wondering why Ford limits the down payment amount. the dealer would only let me do 25% and I gave up at that point. I thought it was 30%. I called Ford credit and they advised that I could get all the paper work done before the car arrives so I wouldn’t miss out on the incentive.

 

[Alan]

The 35 monthly payments before the balloon payment can be prepaid with the following results. The final balloon payment due will be reduced exactly by the amount of interest saved (interest prepaid plus interest pre-compounded). Conversely, turning the car back in will result in a refund of the amount of interest saved. The 36 months of interest on the balloon principal will still be paid either way. The 36 months of interest on the rest will be saved.

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