prepayment penalty on loan?

[dslai]

Hi,

So I just bought a 2011 Fusion SE. My first Ford ever and I thought I got a good deal using X-Plan pricing with $2750 total in rebates ($500 retail customer cash + $500 Ford Credit Retail Bonus Customer Cash + $1000 Promotional Retail Bonus Customer Cash + $750 private cash brochure coupon).

 

I could have paid the car in full with cash, but I opted to finance $10k to get the $500 Ford Credit Retail Bonus Customer Cash rebate (program #11916). Finance guy said that $10k was the minimum needed to finance to get the rebate. I am not sure if that's really true. I was originally told $7500 by the sales guy, and I've also seen the $7500 minimum mentioned elsewhere on the web. Anyways, that's over with now.

 

I want to pay off the $10k loan asap. Apparently, the dealer just did a credit check on me, but my loan has not actually been submitted and approved yet (maybe because I bought the car late at night and Ford Credit wasn't open then?). My credit score was excellent so finance guy said there shouldn't be any issue.

 

Everything I've read elswehere on the web with other people's experiences getting financing with Ford Credit was that there should be no prepayment penalty for paying off the loan early. However, I just read on my contract that the fine print says:

 

"Prepayment. If you pay off all your debt early, you may be charged a minimum finance charge."

 

On the back of the contract form, there's this:

 

"d. You may prepay. You may prepay all or part of the unpaid part of the Amount Financed at any time. If you do so, you must pay the earned and unpaid part of the Finance Charge and all other amounts due up to the date of your payment. As of the date of your payment, if the minimum finance charge is greater than the earned Finance Charge, you may be charged the difference; the minimum finance charge is as follows: (1) $25 if the original Amount Financed does not exceed $1,000, (2) $50 if the original Amount Financed is more than $1,000 but not more than $2,000, or (3) $75 if the original Amount Financed is more than $2,000."

 

So essentially, it seems there's a $75 prepayment penalty for my case. Am I reading this correctly? I'm wondering why everything I've read on other forums, people have mentioned there's no prepayment penalty.

 

The contract was written on a "Retail Installment Sale Contract - SImple Finance Charge" form (LAW FORM NO. 553-CA-ARB). I think this is a pretty standard form here in California. When I bought a Honda 7 years ago, the contract was written up on a LAW FORM NO. 553-CA, essentially the same form and the exact same language mentioned about prepayment.

 

The strange thing is that there is no mention of Ford Credit (FMCC) anywhere in the contract. And reading the contract, it makes it sound like I am getting the loan from the dealer. But I'm sure that the financing will have to go thru FMCC since that was the requirement of the $500 rebate.

 

Did I mess up in not requesting to get the FMCC financing submitted and approved right away when buying the car so I could get the actual FMCC contract? I've never dealt with FMCC before so I don't know if it's normal to get the FMCC contract right at the dealership when buying the car or if I'm supposed to get it later in the mail. The dealership was about to close (I was the last customer there) so probably they really couldn't submit the loan app.

 

I know I'll still come out ahead getting the $500 rebate even if I have to pay some prepayment penalty. But just wondering why my experience seems to be different than others that I've read about who had no prepayment penalty. Maybe it's a California thing?

[akirby]

Hi,

So I just bought a 2011 Fusion SE. My first Ford ever and I thought I got a good deal using X-Plan pricing with $2750 total in rebates ($500 retail customer cash + $500 Ford Credit Retail Bonus Customer Cash + $1000 Promotional Retail Bonus Customer Cash + $750 private cash brochure coupon).

 

I could have paid the car in full with cash, but I opted to finance $10k to get the $500 Ford Credit Retail Bonus Customer Cash rebate (program #11916). Finance guy said that $10k was the minimum needed to finance to get the rebate. I am not sure if that's really true. I was originally told $7500 by the sales guy, and I've also seen the $7500 minimum mentioned elsewhere on the web. Anyways, that's over with now.

 

I want to pay off the $10k loan asap. Apparently, the dealer just did a credit check on me, but my loan has not actually been submitted and approved yet (maybe because I bought the car late at night and Ford Credit wasn't open then?). My credit score was excellent so finance guy said there shouldn't be any issue.

 

Everything I've read elswehere on the web with other people's experiences getting financing with Ford Credit was that there should be no prepayment penalty for paying off the loan early. However, I just read on my contract that the fine print says:

 

"Prepayment. If you pay off all your debt early, you may be charged a minimum finance charge."

 

On the back of the contract form, there's this:

 

"d. You may prepay. You may prepay all or part of the unpaid part of the Amount Financed at any time. If you do so, you must pay the earned and unpaid part of the Finance Charge and all other amounts due up to the date of your payment. As of the date of your payment, if the minimum finance charge is greater than the earned Finance Charge, you may be charged the difference; the minimum finance charge is as follows: (1) $25 if the original Amount Financed does not exceed $1,000, (2) $50 if the original Amount Financed is more than $1,000 but not more than $2,000, or (3) $75 if the original Amount Financed is more than $2,000."

 

So essentially, it seems there's a $75 prepayment penalty for my case. Am I reading this correctly? I'm wondering why everything I've read on other forums, people have mentioned there's no prepayment penalty.

 

The contract was written on a "Retail Installment Sale Contract - SImple Finance Charge" form (LAW FORM NO. 553-CA-ARB). I think this is a pretty standard form here in California. When I bought a Honda 7 years ago, the contract was written up on a LAW FORM NO. 553-CA, essentially the same form and the exact same language mentioned about prepayment.

 

The strange thing is that there is no mention of Ford Credit (FMCC) anywhere in the contract. And reading the contract, it makes it sound like I am getting the loan from the dealer. But I'm sure that the financing will have to go thru FMCC since that was the requirement of the $500 rebate.

 

Did I mess up in not requesting to get the FMCC financing submitted and approved right away when buying the car so I could get the actual FMCC contract? I've never dealt with FMCC before so I don't know if it's normal to get the FMCC contract right at the dealership when buying the car or if I'm supposed to get it later in the mail. The dealership was about to close (I was the last customer there) so probably they really couldn't submit the loan app.

 

I know I'll still come out ahead getting the $500 rebate even if I have to pay some prepayment penalty. But just wondering why my experience seems to be different than others that I've read about who had no prepayment penalty. Maybe it's a California thing?

 

Could be a California thing. It could also just be standard contract language that FMCC doesn't enforce. Even if they did, it's not a $75 fee because you would normally be paying up to one month's interest anyway depending on when you do the payoff, so instead of paying $40 in interest for the payoff you're only paying $75 (worst case). Technically it's not a prepayment penalty - it's just a minimum finance charge. Unless it's a California legal thing my guess is you won't have to worry about it anyway.

[jeff_h]

"d. You may prepay. You may prepay all or part of the unpaid part of the Amount Financed at any time. If you do so, you must pay the earned and unpaid part of the Finance Charge and all other amounts due up to the date of your payment. As of the date of your payment, if the minimum finance charge is greater than the earned Finance Charge, you may be charged the difference; the minimum finance charge is as follows: (1) $25 if the original Amount Financed does not exceed $1,000, (2) $50 if the original Amount Financed is more than $1,000 but not more than $2,000, or (3) $75 if the original Amount Financed is more than $2,000."

 

So essentially, it seems there's a $75 prepayment penalty for my case. Am I reading this correctly? I'm wondering why everything I've read on other forums, people have mentioned there's no prepayment penalty.

 

Sounds like you are on the hook for $75, but still come out ahead. I don't know if it is a "California thing" but that's also my guess since state laws definitely vary. We bought my wife's car last year in NJ and financed through Ford to get an additional $1,000 rebate or whatever the incentive was at the time. Refinanced it a couple weeks later through our credit union and they paid off Ford credit, there was no penalty.

[dslai]

Thanks for the feedback. I'll update this topic after all this gets settled to let everyone know what happened.

[jayman12]

Thanks for the feedback. I'll update this topic after all this gets settled to let everyone know what happened.

 

I paid my loan off 4 days after I picked up my car without any penalty. The dealer said I had to wait until after the first payment period, and another manager said 90 days. Not true, at least for me. My loan was for $31,000!

[georgeny]

Hi,

So I just bought a 2011 Fusion SE. My first Ford ever and I thought I got a good deal using X-Plan pricing with $2750 total in rebates ($500 retail customer cash + $500 Ford Credit Retail Bonus Customer Cash + $1000 Promotional Retail Bonus Customer Cash + $750 private cash brochure coupon).

snipped

 

Since DSIAI never updated I'll add my experience. First I did same to get rebate, despite planning to pay cash I too Ford Credit Loan of 5K ( not 10k minimum as his dealer said ) and asked about immediate payoff on first invoice. I was told by salesmen not prepay. At time of contract signing business manager asked me if I would make THREE separate payments over three months before prepaying. It was not require, however, she asked that I do that because it was required for dealership to get reimbursed for the Ford Credit $500 discount applied. I had decent deal and found this dealer to be reasonable so I will indeed comply with that. ( I buy two new cars every 2.5 years so dealerships and there methods are not unknown to me though they never cease to surprise )

 

Received first invoice and the total payoff amount invoiced is 5233.06, the actual loan amount was 5207.43 meaning immediate payoff would cost me 25.63 If I say with making first three payments it will cost me a few dollars more but I am okay with that. Even if I simply make all 12 payments ( term 12 months ) the interest paid will only be 170.49 for 500 discount, a win win no matter. I was actually shocked you could take a 5k for 12 months with no prepay. Don't see the upside for Ford Credit even if simply make 12 payments?

 

George in NY

[akirby]

Since DSIAI never updated I'll add my experience. First I did same to get rebate, despite planning to pay cash I too Ford Credit Loan of 5K ( not 10k minimum as his dealer said ) and asked about immediate payoff on first invoice. I was told by salesmen not prepay. At time of contract signing business manager asked me if I would make THREE separate payments over three months before prepaying. It was not require, however, she asked that I do that because it was required for dealership to get reimbursed for the Ford Credit $500 discount applied. I had decent deal and found this dealer to be reasonable so I will indeed comply with that. ( I buy two new cars every 2.5 years so dealerships and there methods are not unknown to me though they never cease to surprise )

 

Received first invoice and the total payoff amount invoiced is 5233.06, the actual loan amount was 5207.43 meaning immediate payoff would cost me 25.63 If I say with making first three payments it will cost me a few dollars more but I am okay with that. Even if I simply make all 12 payments ( term 12 months ) the interest paid will only be 170.49 for 500 discount, a win win no matter. I was actually shocked you could take a 5k for 12 months with no prepay. Don't see the upside for Ford Credit even if simply make 12 payments?

 

George in NY

 

They make it up on the majority of people who end up with longer, larger loans who don't prepay. It averages out in their favor.

 

I still don't believe the dealership is on the hook for the entire rebate amount. If that was the case then I think the Ford rebate would have that stipulation attached to it or it would be in the Ford Credit finance contract. I do believe the dealer gets a kickback and you probably do have to make 3 payments for them to get it but I doubt it's big bucks or there would be something in writing.