Question / opinion on financing

[jaruss01]

So I have always leased my cars. I dont think this will lease well, so i will buy.

My income is very much split between lump sum annual bonus/commission, and a base salary. I really like the idea of having low payments through out the year for real-feel cash flow, and it's less sweat to make a big payment once a year.

That said, i really want to keep payments at exactly $500/mo, and will front load a down payment. I was thinking of maxing out Ford 1.9% APR @ 72 months, and then putting whatever down to back into $500/mo. I dont have a trade-in, since all my other cars are leased. After doing the math is looks like around a $20k down payment (inc tax, fees, etc) for my build.

Given the low rates, could i put my down payment money aside and use it towards the bigger bills? sure. But mentally, i just do not want to look at a ~$800 bill every month.

Does that sounds like the right approach? I am a bit weary of tying up all that money in the off chance my model Year 1 car has flaws, or is potentially a lemon....and i have to wait to get my money back, versus just returning the car....Another idea is to put less of a down payment, then wait a year to see if any major problems arise, then I could make a big lump sum payment to get my payments adjusted down to $500/mo. So my question in that situation is - will Ford adjust down my monthly payment, or will they just shorten up the term and keep my payments the same?

Sponsored

 

[PELS82]

I hope Ford offers 1.9%.

 

[Dr.Z]

How are you getting that APR?

 

[jaruss01]

I saw a few articles describing their current financing. They have a new flex financing concept that a lot of ppl are reviewing (and bashing it) and comparing / recommending to go for their current 1.9% offered for 60 or 72 mos

 

[vrewald14]

Do you have any concern with extending the payments out to 72 months?

I.E., generally what I understand is that any payment terms over 60 months put you at serious risk of going upside-down on the vehicles value. I personally would prefer to be at the 48-60 month range.

 

[jaruss01]

Do you have any concern with extending the payments out to 72 months?

I.E., generally what I understand is that any payment terms over 60 months put you at serious risk of going upside-down on the vehicles value. I personally would prefer to be at the 48-60 month range.

never going to happen with a 40% down payment and 1.9% APR

 

[SilverII]

save 6 months of net emergency fund first for the safest route before buying a new car (along with other savings/retirement). It is a depreciating asset with maintenance cost.

 

[jaruss01]

We have plenty saved. 20k in a car doesn’t put us at any risk. Putting personal finances aside -

Question is moreso am I thinking about this right? And will Ford lower my monthly if a make a big lump sum in Year 2?

 

[RotorOver]

Another play on the low down payment option to see how things sort out after the year is to re-finance and increase your down payment at that point. You might not get as good of a rate, but it is the cost (and is offset by the fact) of holding onto your money for the year where you could get a higher return in the market.

 

[atonge40]

I am a VP at a company that does a lot of auto financing.

There are a lot a variables here.

• We have no idea what auto loan rates will be in April - June of 2021
• Even if we did, Ford may not have promotional rates for the Bronco
  • On some vehicles, standard rates can be 5.9% for 60 months or higher (not right now on most things because of COVID)
• If Ford doesn't have great rates at the time through Ford Credit, make sure to get approved the a week or two before delivery
• We have a lot of members/customers that have bonus dependent salaries take out longer term auto loans and pay them off with lump sum payments
  • As long as you get a loan through a financial institution that has no prepayment penalties you'll be fine

If you have any auto financing questions, let me know.

 

[GOAT]

Ford may be expecting such a high residual and demand for used Broncos that the lease rates might be stupid low like the $150/mo Wrangler when those launched.

 

[atonge40]

Ford may be expecting such a high residual and demand for used Broncos that the lease rates might be stupid low like the $150/mo Wrangler when those launched.

That’s the $47000 question isn’t it? What will Ford set the residuals and lease money factors at? Could be a super cheap lease.

 

[Blksn955.o]

Shop around at your local credit union if you have any. The tend to give decent auto rates as they are member owned. Keep your options open.

Most close ended loans are set in their payments. To change that you have to redo the agreement ie refi. Unless the contract let's you pick a payment your payment will be what it is agreed on being.

If you dont have an agreed on seperate payment available be very cautious as even if they accept less than full payment it will most likely be reported to the credit bureaus as a negative remark as a less than full payment.

 

[MadMan4BamaNATL]

We have plenty saved. 20k in a car doesn’t put us at any risk. Putting personal finances aside -

Question is moreso am I thinking about this right? And will Ford lower my monthly if a make a big lump sum in Year 2?

Good questions here and I like the sound financial advice from atonge40.

As for putting that much down; personally I would not. Cash in hand is always worth more as you never know what the future holds. Not talking finances since you have that covered, more thinking if the vehicle gets totaled in an accident.

Think you should/can get over the fear of the higher monthly bill bit. a $500 monthly car payment for a new $45K-$55K vehicle just isn't realistic any longer. I hope you weren't putting money down on a lease, because that isn't smart at all.

Financing is fixed, so your rates will not change based on a lump payment in year 2. Think about it, that would actually work against the finance company because you're taking away some fo their profit off of you. Basically this would pay the car off early. Doing this is only smart after year 3 of ownership, but some would debate this logic, which would be ok. Most depreciation happens within first 2 years, but I predict Bronco to hold value fairly well, much like Wrangler. Paying off a car just before manufacturer warranty ends can be smart before you're on the hook for mechanical stuff. Then you could sell the car before reliability becomes a concern, then role that money into a new one and put some cash in your pocket.

Just a thought.

 

[jaruss01]

Good questions here and I like the sound financial advice from atonge40.

As for putting that much down; personally I would not. Cash in hand is always worth more as you never know what the future holds. Not talking finances since you have that covered, more thinking if the vehicle gets totaled in an accident.

Think you should/can get over the fear of the higher monthly bill bit. a $500 monthly car payment for a new $45K-$55K vehicle just isn't realistic any longer. I hope you weren't putting money down on a lease, because that isn't smart at all.

Financing is fixed, so your rates will not change based on a lump payment in year 2. Think about it, that would actually work against the finance company because you're taking away some fo their profit off of you. Basically this would pay the car off early. Doing this is only smart after year 3 of ownership, but some would debate this logic, which would be ok. Most depreciation happens within first 2 years, but I predict Bronco to hold value fairly well, much like Wrangler. Paying off a car just before manufacturer warranty ends can be smart before you're on the hook for mechanical stuff. Then you could sell the car before reliability becomes a concern, then role that money into a new one and put some cash in your pocket.

Just a thought.

Nope never put anything down on a lease. Thats stupid for other reasons. I always roll in the down payment into the monthly, and pay the bare minimum to walk out the door.

My problem is that im so accustomed to leasing 40-50k cars for 350/mo (under REALLY well negotiated lease deals - nothing down but tax and title). And steer very clear away from brands that dont lease well.

Which is why i want my payments low. But i suppose my options are big down payment. Or typical down payment, and in a year, if there are no bugs i could refi into a lesser loan amount to lower my payments....and if for whatever reason rates are horrendous, I'll wait a year for no bugs and if there are no better refi opportunities, then i would just pay off the entire car in the following year or two (which im not opposed to if rates are 4-5+%).

Although my neighbor recently bought a wrangler in cash and the thing was out of commission for 6+ months for a problem jeep gave him a hard time fixing under warranty. Fixed now, but Im sure his advice would be DONT DO IT.

Sponsored