Ford CEO Jim Farley Is Happy With 84-Month Car Loans

While Ford is facing plenty of uncertainty with the tariffs, CEO Jim Farley apparently isn’t too concerned about prices because shoppers will just take out 84-month car loans. That’s at least the gist of his comments during an earnings call this past week. And people wonder why automakers keep new vehicle prices so high.

Wholesale used car prices increased in April.

“We see customers doing what they can to afford a new vehicle,” Farley said, referencing concerns tariffs will increase car prices. “I mean, we’ve seen 84-month financing increases as a share of our offers on the financing side. Natural levels are well within the bounds of the industry, but customers are doing what they need to to adjust for their payments.”

That’s right, the head of Ford thinks high vehicle prices aren’t a problem since everyone can just take out 84-month car loans. Don’t seek the guy out for personal financial advice.

Let’s do some fun math, shall we? The average new vehicle price is just below $50,000, if you can stomach that, so let’s use that figure and see what your 84-month term does. Let’s say you have good credit, so you get 7.2 percent and you put $5,000 down on the vehicle purchase, you’re looking at paying about $683 a month.

Most people who don’t know much about personal finances just look at that number. What’s really fun is to see how much interest you’ll pay over the life of the loan. In this case, it’s $12,420. That’s enough to buy a decent-ish used vehicle.

If you were to keep everything the same, but switch to a 36-month term, sure you’d be paying $1,393 a month but total interest paid would be only $5,169.

Dialing back the clock to before things went completely insane, in 2019 the average new car cost about $38,000. If you were to finance that amount, minus $5,000 for a down payment at the same interest rate for 36 months, your monthly would be $1,021 but you would only pay $3,790 in interest.

Just so you know, this is what Jim Farley thinks about Americans’ personal finances. Hey, he’s not suffering with a paycheck of $24.9 million last year, even if part of that is made by squeezing shoppers into 84-month loans so Ford can charge $40,000 for a stripped-down, base new Explorer.

Source: The Street

Image via Ford