In new car buying, there are traditionally three ways to pay for the vehicle: cash, finance, and lease. The first two are probably familiar to most people. Cash is self-explanatory; write a check or make a wire transfer and the vehicle is yours to keep, no strings attached. With a loan, the bank or the manufacturer’s finance organization (like Ford Credit) pays the dealer for the vehicle (less any down payment by the borrower), the borrower pays the bank monthly, usually with some interest, and the buyer owns the vehicle at the end of the term. The third option, a lease, may not be one people have used before.
Traditional Auto Leasing
A traditional auto lease may seem like a loan, where the borrow makes monthly payments, but there are other strings attached. Leases allow the buyer to “rent” the vehicle for a fixed term and mileage, with the option to purchase the vehicle at the end of the term or turn the vehicle back in. The monthly payment isn’t to purchase to vehicle, but rather to pay the depreciation as the vehicle ages, and there will be a residual value (what the vehicle is worth) at the end of the lease term. To keep the vehicle at the end of term, the lessee can pay the residual value. This can be a great option for people who take care of their vehicles, drive between 10,000 and 15,000 miles a year, and want a new car frequently.
Traditional EV Leasing
In EV leasing, everything is very similar to a traditional auto lease, except the manufacturer or bank gets to claim the $7,500 federal EX tax credit (if the manufacturer is still eligible) and use it to give the lessee a better monthly rate. The $7,500 is used to reduce the cost of the vehicle before lease rates are calculated—this is known as a capitalized cost reduction. All lease-end options still apply, turn in the vehicle or pay the residual value to keep it. An EV lease works great for buyers who want to try an EV for a couple years and gets them into a more expensive EV for less per month.
For now, Ford is not offering a traditional lease on Mach-E. Their lease-like product is called Ford Options, and it’s who claims the $7,500 federal EV tax credit that makes it different from a lease. With Ford Options, there is still a fixed term and mileage limits, but the lessee who gets to claim the federal tax credit themselves, not Ford Credit. This contrast to a traditional lease, however, means the $7,500 federal tax credit is not factored into the lease, and is not used as a capitalized cost reduction; meaning the Ford Options lease will likely have a higher monthly payment than a traditional EV lease. Instead of Ford Credit, it is up to the lessee to claim the tax credit and spread that money across the term of their contract. At the end of the Ford Options term, the lessee can turn in their Mach-E, or pay the pre-determined balloon payment (aka residual value) to keep it.
Here’s how Ford Options compares against standard loan and leasing options:
|Standard Loan||Ford Options||Ford Red Carpet Lease|
|Contract Terms||Up to 84 Months||36- and 48-Month Terms||24-, 36- and 39-Month Terms|
|Disposal Fee||N/A||$475 - waived with renewal||$395 - waived with renewal|
|Contract-End Options||N/A||1. Return the vehicle|
2. Purchase the vehicle by paying off the balloon payment
3. Return and renew into a new vehicle
|1. Return the vehicle
2. Purchase the vehicle
3. Return and renew into a new vehicle
|Vehicle Ownership||Customer||Customer||Ford Credit|
|Federal EV Tax Credit||Customer||Customer||Ford Credit|
Compared to other EV leasing, here’s how Ford Options will stack up (using the manufacturer’s online payment calculators)
|Ford Mach-E Select AWD|
|Hyundai Kona Ultimate|
|Ford Mach-E Premium ER RWD|
(300-mile range, 0-60 in 6.5)
|Tesla Model Y LR AWD
(316-mile range, 0-60 in 4.8)
|Cap. Cost Reduction||$2,500 Ford bonus cash (could not remove from calculator)||$7,500 fed EV credit||$2,500 Ford bonus cash (could not remove from calculator)||$0|
|Term||36 months||36 months||36 months||36 months|
|Federal EV Tax Credit||Customer||Hyundai Credit||Customer||N/A|
|Mileage Limit||10,500 miles/year||10,000 miles/year||10,500 miles/year||10,000 miles/year|
|Monthly||$644 per month||$659 per month||$902 per month||$633 per month|
|Monthly w/ tax credit spread across lease term||$436 per month||N/A||$694 per month||N/A|
Price for price, the Mach-E has less range and standard equipment than the Hyundai Kona Ultimate, with a marginally less expensive monthly payment. Factoring in the fed tax credit to the monthly payment, the Mach-E is much less expensive than the Kona, but it still has a lower range and is missing many premium features that come standard in the Kona Ultimate.
Comparing mileage for mileage, the Mach-E is much more expensive monthly (even when factoring in the tax credit) than the Tesla Model Y. Tesla’s Model Y lease is hard to beat in the EV space.
This is just a very high-level look, using manufacturers online calculators and available information. So, please take all of this with a grain of salt, I’m no vehicle finance expert. Hopefully when it comes time for customer deliveries, Ford will have some better options for Mach-E buyers and lessees. For now, for people who like to lease, Mach-E is a tough sell against its rivals.