Question on Ford Options Interest Calculation

[rolo2285]

Sorry if this has been asked already but I couldn’t find it.

I purchased my MME in December using the Ford Options and I don’t understand how the interest is being calculated. My Plan was to make larger payments of $1500. Here are the Contract Details:
Amount Financed : $51,097.86
APR: 6.9%
Finance Charge: $10,674.91
Number of Payments: 47
Final Payment: $23,641.20
Monthly Payment: $811.31

After making my first payment, the breakdown was Principal: $1,113.62 and Interest: $386.38. Is the interest right or is this a pre-payment penalty? I expected it to be 6.9% / 12 * $51,097.86=$293.81 and the remainder to principal.

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[hybrid2bev]

Sorry if this has been asked already but I couldn’t find it.

I purchased my MME in December using the Ford Options and I don’t understand how the interest is being calculated. My Plan was to make larger payments of $1500. Here are the Contract Details:
Amount Financed : $51,097.86
APR: 6.9%
Finance Charge: $10,674.91
Number of Payments: 47
Final Payment: $23,641.20
Monthly Payment: $811.31

After making my first payment, the breakdown was Principal: $1,113.62 and Interest: $386.38. Is the interest right or is this a pre-payment penalty? I expected it to be 6.9% / 12 * $51,097.86=$293.81 and the remainder to principal.

See this thread.

https://www.macheforum.com/site/thr...s-reality-principal-interest-breakdown.26519/

There’s no prepayment penalty. Interest is calculated on the whole amount financed at a daily interest rate based on the remaining balance (including the balloon) and interest accrues based on the number of days since your last payment was posted (or number of days since the contract was signed for the first payment). So if you had more than 30 days to first payment then more interest would have accrued.

 

[rolo2285]

(or number of days since the contract was signed for the first payment)

That's why! My first bill was due 2/13/2023 but i signed the contract 12/30/2022. So that's why it's more than 30 days of interest. I have never seen a lender do that before. I guess it's technically right..

 

[hybrid2bev]

That's why! My first bill was due 2/13/2023 but i signed the contract 12/30/2022. So that's why it's more than 30 days of interest. I have never seen a lender do that before. I guess it's technically right..

Technically right is of course the best kind of right.

I’ve worked for 3 different captive auto financing companies in my career since 1995. They all use daily simple interest.

 

[rolo2285]

I’ve worked for 3 different captive auto financing companies in my career since 1995.

ooh, so you're the perfect person for a follow up question. Im guessing the answer is obviously yes but just to be certain.

Since i'm paying more than the min every month, I will pass the Balloon payment earlier than the balloon's deadline. Does that mean my payment obligations stop at that point till the balloon is due but the interest continues to accrue?

 

[hybrid2bev]

ooh, so you're the perfect person for a follow up question. Im guessing the answer is obviously yes but just to be certain.

Since i'm paying more than the min every month, I will pass the Balloon payment earlier than the balloon's deadline. Does that mean my payment obligations stop at that point till the balloon is due but the interest continues to accrue?

Interest accrues every day until the entire loan is paid off.

Think of the loan this way. Because you can refi the balloon into monthly payments what you have is a essentially a 7 year loan with a different payment schedule. You make payments 1-47 monthly and then payments 48-72 are due all at once as a balloon note. Or refi to convert the balloon into monthly payments 48-72.

 

[Arsenic17]

Did Options too and had this exact same question myself after making my first payment. The interest was too high based on my math. Turns out it was related to the first statement period being longer than a month. Mine was approximately 45 days, so I was paying 50% more interest than normal. All my payments since then have been as expected. You will see a slight difference for months with 28,29,30 and 31 days etc.

This is my post from months ago that basically mimics yours: https://www.macheforum.com/site/threads/ford-options-payment-breakdown.25211/

With that all said, speaking to your last question, even if you pay extra principal every month, you will still owe the same monthly payment until the end of your Options contract (36 or 48 month). Your payment will be a lesser interest percentage each time than if you had stuck to the schedule, but your payments won't stop or decrease from the agreed value.

I would double check the contract, but I think If you get to the end of your Options term and the remaining loan balance is less than the original final balloon payment (residual), Ford will cut you a refund check if you want to return the car. If you pay any amount extra at all, even $1.00, this will be your situation at the end of the term.

Note that I've seen others succeed at getting their loan recast one time for free with no issues. That is, if you pay a ton extra money for the next year or two towards the loan, you can contact Ford Credit and get the remaining payment schedule adjusted so you don't end up way under the final balloon value. This would lower your monthly payment for the remainder of the Options term. If you plan to pay $1500 a month regardless, this really doesn't matter. It just helps if you want to ease your required payment.

Good luck.

 

[glenthompson]

That sounds like a bad deal to me. My MME had $45,605 financed through Ford Credit at 3.9% for 48 months. Monthly payment of $1,029. This was back in December. If I paid it off at $1,500 a month it would be completely paid off in 33 months. That 6.9% is higher than the 3 quotes I got for mine. Ford Credit and 2 credit unions. All were under 5%.

 

[Maquis]

That sounds like a bad deal to me. My MME had $45,605 financed through Ford Credit at 3.9% for 48 months. Monthly payment of $1,029. This was back in December. If I paid it off at $1,500 a month it would be completely paid off in 33 months. That 6.9% is higher than the 3 quotes I got for mine. Ford Credit and 2 credit unions. All were under 5%.

With options, you pay more in order to be able to walk away from the car at the end of the balloon term, even if the market (and resale value) tanks.

 

[Ghost Ryder]

That sounds like a bad deal to me. My MME had $45,605 financed through Ford Credit at 3.9% for 48 months. Monthly payment of $1,029. This was back in December. If I paid it off at $1,500 a month it would be completely paid off in 33 months. That 6.9% is higher than the 3 quotes I got for mine. Ford Credit and 2 credit unions. All were under 5%.

Credit market has been crazy the past year. It depends on when you got your loan.

I also got Ford Option plan, but it was in 3/22. At that time, I got 1.75%. So in comparison to the OP, I'm paying the same month payment of $811 over 48 months, with the same balloon payment, but the amount finance was 7-8k more.

 

[glenthompson]

Credit market has been crazy the past year. It depends on when you got your loan.

Mine was in Late Nov so less than a month different than OP. If I could have locked in my financing when I ordered my MME in May I would have a significantly lower interest rate. Timing can be everything. Bought our house in late 2020 and got a 2.9% mortgage.

 

[Ghost Ryder]

Mine was in Late Nov so less than a month different than OP. If I could have locked in my financing when I ordered my MME in May I would have a significantly lower interest rate. Timing can be everything. Bought our house in late 2020 and got a 2.9% mortgage.

Unless things have changed, I thought that options rate was locked in when you placed your order.

 

[rolo2285]

That sounds like a bad deal to me. My MME had $45,605 financed through Ford Credit at 3.9% for 48 months. Monthly payment of $1,029. This was back in December. If I paid it off at $1,500 a month it would be completely paid off in 33 months. That 6.9% is higher than the 3 quotes I got for mine. Ford Credit and 2 credit unions. All were under 5%.

Interest rates all skyrocketed in December. By the end of the month, I signed 12/30, they were all that high. Even at credit unions. I didn't push hard enough for them to honor the rates when my 22->23 order converted.

 

[rolo2285]

Unless things have changed, I thought that options rate was locked in when you placed your order.

That's what i thought too. But i didn't hear that from my dealer so i felt like it was his word against mines.

 

[Ghost Ryder]

That's what i thought too. But i didn't hear that from my dealer so i felt like it was his word against mines.

Sucks that your dealer didn't want to work with you. All they had to do was call Ford's Finance line. That's what mine did to secure the $2000 bonus that was available when I placed the order. Took them all of 5 mins.

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