ford Motor Credit

[Anonymous]

i ended up buying a brand new 2020 ford through a dealer on June 1, 2020.  Ford motor credit did a pull on Equifax (Fico 8 588) &

Experian (Fico 3 655) & was offered all options including 0% for 72 mos ; 2.9% for 72 mos (incentivized rate) & 7.82% for 72 mos (std rate) or 4.9% for 84 mos (which i chose; just so i can get rebates); All options included zero money down. My vehicle purchase was made during the COVID-19 phase wherein the rebates/0% for 72 or 84 mos approval no matter what your credit score were outstanding. It may no longer be offered after june 2, 2020. I also suspect used car prices will go up SIGNIFICANTLY for the next 4-6 mos. (Ford factories will b up & running sometime late June 2020 & first cars manufactured will not be ready & out the door from factory to their dealers almost until August, 2020). 

if choosing 0% for 72 mos it required ford financing & you would lose all rebates ; with 2.9%  for 72 mos you would get $1500 in Build to Lend rebates + any one of the following rebates
$500 on any one of military/medical pro/allied health pros (Emt, firefighter, police)/Farm Bureau or belong to a horse organization;
you were only allowed one $500 rebates not multiples of 500 even if you qualified.

i was eligible for farm bureau. 4.9% APR allowed me only $1500 (build to lend cash rebate) + allowed $500 in farm bureau = $2000 but took away $1500 cash rebates.i asked to have my rebates mailed to me at home. The 90 days deferement would increase my 84 mos to 87 mos of financing but lower my payment just a little bit. 

i also went thru costco auto program which helped me buy at INVOICE pricing versus MSRP. i think its costco pricing on ford in particular happens to be better than Ford employee discounts. 
My amount of financing on the vehicle was nearly $27,000 financed for 84 mos  with Zero down payment & putting $2072 on a credit card for Taxes Title & License (TTL) giving me nearly $379.a month. First payment due on June 29, 2020.  I opted for this,  thinking i would want the longest possible payment terms with the understanding that with FORD motor credit i will pay extra $500 over & above my scheduled $379/mo for the next 4-6 mos & re-finance it at a lower rate ($2000 in rebates divided by 4 mos) & make extra extra $$$$$ in 4 months to bring down the amount financed to nearly $250/$260/ month which i think is in my affordable range. I m working to get 2.9% APR for 72 mos  or better upon refinancing in 4 months. I already am working to get to 700 FICO score & then re-finance within the next 4-6 mos. 
My question is 

a) is this a good strategy of getting to $250-$260 or better giving me 4 extra months just so i can pay down balance by upto $5,000;

b)Should i choose different strategy or staying with Ford Motor credit at  4.9% for 84 mos with lower balance a better option?
c) i m diligently working on my credit to get to 700+ on TU (BECU) or EQ (DCU) & then refinance?  

[Girlzilla88]

I would have done the 0% offer, but that is just me typically a year is the 'sweet spot' for refinancing but YMMV

[Girlzilla88]

If you can hit over 700 before you refinance that would be awesome be sure to be checking your Auto Scores too  ^^

[Anonymous]

Have you run the numbers on these options?  I'm not seeing how the $2000 rebate now is cheaper in the long run to 0% unless you have the cash to pay off the loan before you have paid more than 2k in interest.  From my quick evaluation of your plan, I see you paying over 2k in interest.  Go plug in your numbers into a car payment calculator and see if it makes sense.  

I would go for the sure thing at 0%.  

[ridgebackpilot]

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@Anonymous wrote:

4.9% for 84 mos (which i chose; just so i can get rebates)

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Yikes! I hope you didn't choose this loan when you were offered Zero Percent APR?! At 4.9% for 84 months, you'll always be underwater. You'd have to buy Gap insurance in case you total the car! No amount of rebates is worth paying interest if you have the option of paying no interest. 

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@Anonymous wrote:
if choosing 0% for 72 mos it required ford financing & you would lose all rebates

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This is a false choice. Dealers ALWAYS want you to think that you have to choose between Zero Percent financing and rebates. But that's simply not true. If a dealer tells you that, find one that will give you both, especially if they want to sell you a car badly enough. Negotiate, negotiate, negotiate! 

[Anonymous]

its actually too late now that i signed all paperwork; 0% for 72 mos was still an option, however, $2k in rebates ($500/mo for 4 mos) i was unwilling to let go;
(4.9% for 84 mos= $378/mo) also gave me 2k in rebates & so did 2.9% for 72 mos. ( 27k financed at 2.9% for 72 mos = $ 407.66 (Also an option with ford financing; would get same $2k in rebates) : $408-$378 = $ 30 extra in scheduled pay over loan term versus paying interest on lower APR? It was a difficult call to make. 
Now taking 4.9% for 84 mos has made buying GAP INSURANCE very difficult & expensive. (GapDirect) cannot offer gap insurance for 84 mos financing. Dealer's GAP insurance offer was one time fee of $499 for 24 mos (which i thought was high) v/s GAPDirect showed one time $185 payment for o% for 72 mos financing on 24 mos term. 

0% for 72 mos = $374/mo; i would be stuck for 72 mos at 0% forever with Ford Motor; It makes no sense refinancing 0% after 4 years i'd still be paying $374/mo but ya no interest $$$$. sure.

27k amount financed less $378/mo scheduled payment beginning jun 29 & then add $500/mo for the first 4 mos payments ; then one time $5k in extra payment just before refinancing so i dont find myself upside down; Had i not paid TTL out of pocket, this payment would be even higher. 
(27k-(378x4mos=$1512) + (500x4mos=$2000) -$5,000 = $ 18,488 (amt to refinance)}; from 27k to nearly $18.5k in 4 months; then $18k refinanced for 72 mos @ 2.9% APr = $272.68 which is in my comfort zone for payments. 60 mos takes me to $ 322.64. 

My thinking in 4.9% for 84 mos was to get the lowest possible payment now, (while covid-19 is on) take all rebates home, improve my credit in 4-6 mos (which i believe i can get to 700+FICO);  just have my name on title (not include spouse) & when & if i cant get to 700+ in FICO or have 5k/6k in cash that i can be rest assured i have the lowest payment by stretching it to 84 mos. i wish i had the $5k-6k money upfront at tiem of signing on with Ford Motor credit but i dont? i sure anticipate i will have it in 6 mos or less either thru wages or tax refunds. 

Conversely, i may stick with 4.9% for 84 mos while having $18.5k balance and pay more as $$$ becomes available. My household income varies week to week & month to month & i needed a second car & had to make a decision on it. Lowest payment NOW & refinance later was on my mind all this time. 
So on 4.9% for 84 mos deal,  i plan on making 5k-7k in extra payments & then re-finance it with another bank in 4-6 months.

There is no intention of carrying it for 84mos. more interest is paid in in early months/years & I understand that but i also am making more extra payments just so i can refinance for either 60 mos or 72 mos at a rate & monthly payments i can afford. My target payment is $270-$300 in either 60 mos or 72 mos.

fortunately, my auto insurance rate is low for 6 months (full coverage) on this new car which is far cheap than anywhere else i can get so maybe just shopping now for GAP policy for 84 mos financing with lowest charges & competitive coverage. (seeking help in finding gap insurance for TX). 

Does anyone think i need GAP INSURANCE; if yes, what term (24 or 48 mos) is ideal? how much is reasonable premiums? i also dont know if extended warranty is better to buy now while under 100 miles or buy just before bumper to bumper warranty at 36k miles expire. 

I welcome anyone havng a CONTRARIAN view of my thinking here. 

[Mv350]

While I completely understand wanting a lower payment, why choose to pay interest? When making larger payments, you will end up making future payments due smaller, even eventually needing to pay 0 some months. If you continue to pay on a month that 0 is due, you will push your payment out further. If you were making 7k in extra payments within the first 4 months. Your next payment due, would have been in 18 months, you could then make smaller payments leading up to the 18 months, which would in turn push the date out further. All without having to pay interest, or deal with refinancing in the future.

I do get the rebates thing though. Ford would not do rebates and 0% on the FMC. I chose the 0%, but still paid $3,700 under sticker. 

[Anonymous]

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Not sure i understand everything you are saying here. Let me see if i can explain.

You said
"why choose to pay interest? "
becoz paying SIMPLE interest on an auto loan is not the same as a mortgage loan or commercial loan. of course, i was eyeing small payments in lieu of paying interest, given my situation as i know it & covid19 happenings do not assure me that i will have continuous steady income for the next 4 years, so i opted for lowest payments. atleast that much i know i can pay. Eventually, if everything goes as planned, i will have steady consistent scheduled affordable payments i can live with upon refinancing on my own terms with a bank/lender.
You said
"When making larger payments, you will end up making future payments due smaller, even eventually needing to pay 0 some months. If you continue to pay on a month that 0 is due, you will push your payment out further.">>>>>> i haven't quite understood how that is? explain.
You are betting that i will have $379/mo available for the next six years. I dont think so given the present circumstances. Its risky  for me. 
once a loan agreement is reached, you are on a schedule. On 29th of each month, you are scheduled for a $378/ mo in payment to Ford Motor Credit. The scheduled payment consists of Principal & Interest.
If anything paid over and above the scheduled payment applies first to the principal & thereby reduces the principal. In reducing principal, the daily rate of interest accrued is still accumulating & is applied to remaining principal balance to calculate P & I. (An amortization schedule breaks down how much goes to principal & how much goes to interest).
The amount scheduled is due on 29th. I cannot skip it. if i come across extra $$$ i can pay towards the loan. 
For any unforeseen reason, i do not like to find myself not having the $378 available to me every month even 4 years from now. I would not like myself to be put in such a miserable situation. so to me, 84 months with $378/mo in payment, even if interest is charged made sense; thats just my thinking &  I stand by it. 
I guess there can or is a better explaination, however, i did what i felt was good & right for me. 
but still paid $3,700 under sticker.
i paid MSRP 30k less invoice/dealerdisc = $26910


June 29 
Opening Bal : $26,900
SchedulePay: $378. (eg: $111 Interest; $ 276 Prin)
 On June 30; Added $: $500 (To principal only; designated as such).

July 29
Opening Bal: $26,900 - $276(Prin) = $25,724
Added $500: $25,724-$500 = 25,224
Sched.Pay : $ 378 (eg: $110 Int & $268 Prin)
So the
$25,224 - $268(Prin) = $24, 956
Add $500: $24,956-$500= $24,456

In above example, i cannot afford to make $407 in payment every month for 6 years (if i m scheduled for that);  Maybe every month i can only afford to pay $373; no matter what ; i may have the extra $$$ in the first few months of the loan but really only can come up with my scheduled amount by the due date. 

As i explaiined, i was only thinking PAYMENT $$ & not so much INTEREST? Also, thinking i would refinance it in few months to get to an affordable scheduled payment that way in future i will have to come up with fewer $$$ . I just dont know if i can ever skip a payment & make it up with two months or three months of payments together at one time. 

Beginning Principal balance/loan amount = $26,910 ; Amortization schedule is shown below. (upto Dec) 

Jun, 2020
$110 Interest
$269 Principal
$26,641Balance
+ Add $500 to principal 
Jul, 2020
$109 Interest
$270 Principal
$26,371
+ Add $500 to principal
Aug, 2020
$108 interest
$271 Principal
$26,099 Balance
+ Add $500 to principal
Sep, 2020
$107 Interest
$273 Principal 
$25,827 Balance
+ Add $500 to principal
Oct, 2020
$105 Interest
$274 Principal 
$25,553 Balance
+ Add $500 to principal
Nov, 2020
$104 Interest
$275 Principle
$25,278
+ Add $500 to principal
Dec, 2020
$103 Interest
$276 Principal
$25,002
+ Add $500 to principal

@Mv350 wrote:

While I completely understand wanting a lower payment, why choose to pay interest? When making larger payments, you will end up making future payments due smaller, even eventually needing to pay 0 some months. If you continue to pay on a month that 0 is due, you will push your payment out further. If you were making 7k in extra payments within the first 4 months. Your next payment due, would have been in 18 months, you could then make smaller payments leading up to the 18 months, which would in turn push the date out further. All without having to pay interest, or deal with refinancing in the future.

I do get the rebates thing though. Ford would not do rebates and 0% on the FMC. I chose the 0%, but still paid $3,700 under sticker. 

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[ridgebackpilot]

Allowing yourself to be seduced by a low monthly payment is "penny wise and pound foolish". Of course the longer your loan term, the lower your monthly payment. But in the long run, you'll end up paying a lot more.

Over the life of your loan, you'll pay $4,950 in interest. You only saved $2,000 in rebates. So you're actually losing $2,950.

In my experience, you're unlikely to be able to reduce your interest rate further by refinancing.

And you most definitely need Gap insurance for your loan. Even with extra principal payments, you'll still be way underwater on your loan. Gap insurance isn't expensive and can really save the day if you total your car and owe more on your loan than your car insurance will pay.

Even with a Zero Percent interest loan, depreciation on new cars is so high that you almost always need Gap insurance unless you made a big downpayment. Nevertheless, the choice is clear: It's impossible to beat the value of a Zero Percent APR auto loan!

[Anonymous]

so have you bought GAP insurance for people having financed for 84 mos. i called up my credit union & they dont have it. Gap Direct requires upto 72 mos financing only to offer gap insurance. i need to find out who would offer me best GAP insurance. 

StateFarm, AllState LibertyMutual, nationwide, Farmers, 21st Century(not in tX where i m) have no insurance. GapDirect only covers upto 115% max of KBB while most Dealers cover upto 150% max KBB.