Ford Offers 7-Year Loans on the Maverick and It’s a Huge Problem
Ford is a business. Hell, it’s in their name: Ford Motor Company. That means, come the end of the day, they have to turn a profit to keep the lights on. Well, that and to make more excellent Ford GT’s. However, business sense and morality often collide. Usually, one wins over the other. That’s why we’re here. Unfortunately, business may have beat out morality again (hi there, Tesla). Now, it’s time to examine why the American motor company’s loans may be predatory towards buyers.
Car finance 101
First, a little finance 101. Just like a house, a car is one of the largest purchases you’ll ever make. As such, loans can be helpful. They can also be harmful, but more on that in a bit. A loan can be helpful because that expensive car is now divided up into more manageable monthly payments. These payments can be further reduced by putting money “down” on the purchase price of the vehicle, reducing how much you need to finance.
Usually, your bank will offer financing. Generally speaking, they’ll do it for a small interest rate on the loan, say, 1%-3%. Sometimes, manufacturers will do it too, like Ford has done. This is where the trouble starts. From one point of view, this may not be a good thing, as Ford, the people who make your car, now have a vested interest in keeping you in that loan for as long as possible. The trade-off? A lower monthly payment to entice buyers into an already cheap car.
Ford’s 7-year loan offering
According to Cars Direct, Ford will offer you a 7-year loan to the tune of a massive 5.9% APR. That is a frankly disgusting interest rate. Some quick math reveals that the American automaker will make roughly $4,500 in interest off of you during those seven years. This isn’t even the first time the automaker has done this. The new Mustang Mach E had a very similar offer at a similarly appalling interest rate.
All this to say nothing of the depreciation. The Maverick could be a smash hit, like the Mach E. Or, it could tank along with its resale value. Regardless, seven years of depreciation at a segment average of around 20%-40% isn’t a good look. Based on that math, you’d be losing close to $5,000 in the first year, all while paying Ford their 5.9% interest rate. You would be far better off putting some money down and financing through your local credit union. Some banks are shady, but not 5.9% APR shady.
This is not a good idea
Here’s where we get into business vs. morality and playing devil’s advocate. Or, in this case, Ford’s advocate. It is a smart business move. The customer is loaned your truck for their entire ownership of the vehicle, and then you, as Ford, can take it back on trade and mark the thing up and sell it again. Of course, this isn’t exactly moral. An absurdly high interest rate, coupled with depreciation, leaves the customer almost nowhere to turn but the trade-in lot. Though this is based on opinion, please consider other alternatives to Ford’s loan program, such as a loan from your local credit union.
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