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Why Ford Credit is abandoning Leasing for Mach E

hybrid2bev

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MF: what is the rate set by Ford Credit before dealer markup?

Residuals are set by Ford.

What are the residuals for:

7,500 miles, 10,000 miles, 12,500 and 15,000 miles: 36 months and 48 months

Thanks.
Yes when money factors are published in the C&I grids those are the net dealer buy rates.

Residuals are set by a super awesome team at Ford Credit (who owns the vehicle in the case of a lease) in cooperation with Ford.
 

eltonlin

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Are you able to reveal the interest rates on the Options program 36 month for tier 0/1 credit? The 5% posted on here seems very high, when anyone can get a (unsubdized) loan from a local bank at half that rate...

Also, can the options lease/loan be taken out and then paid off in full immediately? I ask because it looks like there is a $2500 incentive associated with the options lease.
I have been enlightened by @hybrid2bev and now “get it” as it pertains the Options.

Options is a simple balloon loan, so while it looks like a lease, fundamentally it’s just a different type of loan. And given that you should have all the options available to you as a regular loan, such as prepaying in full (whether it’s the monthlies, or the entire loan).
 

malba2366

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Yes when money factors are published in the C&I grids those are the net dealer buy rates.

Residuals are set by a super awesome team at Ford Credit (who owns the vehicle in the case of a lease) in cooperation with Ford.
Why is it that the lease buy rates are somewhat secretive while the finance buy rates are openly published...the dealer can mark up either rate.
 

JTK44

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I have been enlightened by @hybrid2bev and now “get it” as it pertains the Options.

Options is a simple balloon loan, so while it looks like a lease, fundamentally it’s just a different type of loan. And given that you should have all the options available to you as a regular loan, such as prepaying in full (whether it’s the monthlies, or the entire loan).
You are correct: it is a loan.

On the sister board the agreed upon term for the Ford Option Plan is a "deferred purchase plan."

It is a straight financing deal, at not a particularly attractive interest rate with a balloon at the end.

The only "twist" is that you can walk away from the balloon.

But it is not a lease: the title is in your name, and you pay sales tax on the full purchase price unlike in all but six states, where when you lease the sales tax is on the sum of monthly payments plus any cap cost deductions.
 

DBC

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The only "twist" is that you can walk away from the balloon.
Which is why in substance it's a lease. You pay a monthly fee for a set number of miles based on the difference between the purchase price and the residual. After making periodic payments you can walk or make a payment and keep the vehicle. So how is this fundamentally different from a lease?

If it looks like a duck, swims like a duck, flys like a duck, and quacks like a duck, maybe it is a duck.
 

hybrid2bev

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Why is it that the lease buy rates are somewhat secretive while the finance buy rates are openly published...the dealer can mark up either rate.
Because when subsidized retail APR programs are announced the dealer can’t mark them up. If you see an ad on TV or online for 0% for 72 months then you would not sign a contract at 3%. Standard rates on the other hand are not made public so the dealers can mark them up.

Lease customers tend to care more about the monthly payment than the money factors. This gives dealers a chance to cut the sales price of the vehicle and make up the difference by marking up the rate, all the while the customer see’s the same monthly payment. Only savvy customers think about converting money factors to an APR to help make comparisons. How many lease customers ask to see the lease worksheet and study the money factors? Just me?

Within the dealership it can be an internal game between the sales team and the finance manager. This is why when negotiating for a new car your salesperson will ask what monthly payment you are looking for. Then they figure out how much they can mark up the vehicle price and mark up the rates to get you that payment. Savvy customers will negotiate the vehicle price and financing separately. Get the best vehicle sales price first, then talk about rates/payments.
 

JTK44

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Which is why in substance it's a lease. You pay a monthly fee for a set number of miles based on the difference between the purchase price and the residual. After making periodic payments you can walk or make a payment and keep the vehicle. So how is this fundamentally different from a lease?

If it looks like a duck, swims like a duck, flys like a duck, and quacks like a duck, maybe it is a duck.
Because of the two things:

  • Sales tax: In the Option Plan you pay sales tax on the purchase price. On a lease you pay sales tax on the sum of the lease payments plus any cap cost reduction.
  • Residual: In a lease the residual is never below 54%
What you are conflating is that initially Ford said to get the Federal Tax Credit, that instead of leasing they would come up with Ford Option plan.

That was all well and good until the finance calculator appeared on the MME website and we realized that the balloon was 44%.

This drove the monthly payments ski high - hundred of dollars per month beyond what a normal lease would be on a similarly priced car.

Then some of us started to check around and see how other high end (luxury) manufacturers handled the Federal Tax Credit in their leases of EV's:

What we found was:

  • Normal residuals: 54% to 58%
  • Cap cost reduction equal to the Federal Tax Credit
Conflating the balloon percentage in the Option Plan with a residual percentage is in error.

The option plan is a finance plan. The Balloon does not change that fact.

Go back to where we started:

A Ford Edge ST which is bigger and has similar handling to the MME lists for $10,000 less than a MME premium. With incentives closer to $13,000 less. The Edge ST can be leased for $450 a month, including sales tax, acquisition fee with Zero down. The residual is 55% - but that is unimportant.

What is important is the monthly payment of $450, everything in, no money down is for a car with a MSRP of $48,000.

The MME under the Ford Option Plan with a $7,500 down payment is $748 a month. Tax is on the selling price $4,464 (8% X $55,800). That is an additional $124 a month, total $872.

That is an absolutely insane amount to pay for a $48,300 car ($55,800 - $7,500) - a car with the same MSRP as the Ford Edge ST.

Think about that: You can have two Ford Edge ST for the price on one MME - yet both have the same MSRP.

see: https://www.ford.com/buy/mach-e/bui...owertrain=DR--F_EN-EJ_HTHAD_TR-WA&paint=PNZAT

Very few people if any will do that - at least I will not.

With the Ford Option Plan a "bust" all that is left is buying outright or financing.

When cars are above $50,000 Ford know that more than 50% are leased. (85% of Mercedes E class, starting at $54,200, and up are leased)

The lease with a 44% residual and Federal Tax Credit, or 55% residual without the Federal tax credit give you monthly payments similar to the Option Plan - which is already a "no go" - close to $900 a month with tax.

What Ford knows, and what everyone shopping for an EV, is that the Model Y can be had for $633.

As the "new guy" on the block trying to enter a market dominated by Tesla, Ford should be less expensive or equal but certainly not hundreds of dollars more per month than the Model Y.

If after the first initial "I must have the Mustang MachE are sold" (people on this forum) Ford will have to leases with residual of 55% and a cap cost reduction of $7,500.

Otherwise, imo, they will be sitting on the dealers lots: they cost just too damn much!

.
 

JTK44

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Because when subsidized retail APR programs are announced the dealer can’t mark them up. If you see an ad on TV or online for 0% for 72 months then you would not sign a contract at 3%. Standard rates on the other hand are not made public so the dealers can mark them up.

Lease customers tend to care more about the monthly payment than the money factors. This gives dealers a chance to cut the sales price of the vehicle and make up the difference by marking up the rate, all the while the customer see’s the same monthly payment. Only savvy customers think about converting money factors to an APR to help make comparisons. How many lease customers ask to see the lease worksheet and study the money factors? Just me?

Within the dealership it can be an internal game between the sales team and the finance manager. This is why when negotiating for a new car your salesperson will ask what monthly payment you are looking for. Then they figure out how much they can mark up the vehicle price and mark up the rates to get you that payment. Savvy customers will negotiate the vehicle price and financing separately. Get the best vehicle sales price first, then talk about rates/payments.

Everyone I know asks for both the residual and the MF.

Remember the MME is not a $30,000 car. It is a $50,000 car.

We know for example a Merdedes E350 4 matic Mercedes all in, including sales tax, leases for under $750 a month and a BMW 530iX for about $700 a month.

Both cars have a higher MSRP than the MME premium AWD LR.

When the Ford dealer tells us the Option plan will be over $900 a month and a lease over $800 a month ;what do you think is going to happen?

I think you are not giving enough credit to the buyer: It is not that we are indifferent to price, but we are not fools.

A Ford MME should not and I add, cannot lease out or pay out under the option plan more than an E Class or 5 series BMW.
 

hybrid2bev

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When the Ford dealer tells us the Option plan will be over $900 a month and a lease over $800 a month ;what do you think is going to happen?
I think it depends on the customer. If you are for sure going to return the vehicle and want a lower monthly payment: lease.

If you want a lower total cost of ownership: Options.
I said excluding Italian cars!
Breaking news. Jeep’s are now cars and come from Italy. I think some autoworkers in Toledo,OH are going to be upset at the news. LOL. 😂
 

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kdryden99

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I need a lease explainer!! My head is spinning from reading all this. I'm completely lost.

Financing and Options I understand. But leases and money factor, residual, MSD, dealer markup of rates...it all makes my head spin 🤯
 



 









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