[sithanas]

Was just at the dealer yesterday to look at our FE and couldn’t come to terms on financing—even if they got rid of their markup (which they really insisted on keeping) it’s still more than I’m comfortable spending even on a 72-month note. (And we’re definitely not going to an 84.) However the dealer said he had word from KMF that they’re about to launch a balloon payment program which sounds a lot like the Ford Options program for the Mach-E, where you get the credit directly but the payments are structured like a lease with a balloon at the end of the 36 months where you buy it out or give it back. Anyone else heard anything about this?

 

[petraman]

I would walk if they're forcing you to pay markup on the car you reserved... that's just a dick move on their part, and there are plenty of dealers out there selling from MSRP (unless you're in SoCal or FL, it seems, haha).

 

[sithanas]

Some updates on the program--dealer got back to me and confirmed the terms are basically identical to the lease program (36 months, 4.25%, 52-54% residual depending on trim) but since it's a balloon payment you get the tax credit (vehicle is titled in your name). Basically you would put $7500 down and get that back on your 1040 at the end of the year. My thinking is Kia may be hedging their bets right now with the uncertainty about the future of the tax credit--if they decide to exclude corps. from receiving it, for example, then Kia would lose a shitload of cash if they are folding that into leases right now. It makes for a more attractive program for sure, but not as attractive as a lease that loads the $7500 up front. (Also 4.25% is real high considering loans are running at about 2.25% still.)

 

[Neutron]

Some updates on the program--dealer got back to me and confirmed the terms are basically identical to the lease program (36 months, 4.25%, 52-54% residual depending on trim) but since it's a balloon payment you get the tax credit (vehicle is titled in your name). Basically you would put $7500 down and get that back on your 1040 at the end of the year. My thinking is Kia may be hedging their bets right now with the uncertainty about the future of the tax credit--if they decide to exclude corps. from receiving it, for example, then Kia would lose a shitload of cash if they are folding that into leases right now. It makes for a more attractive program for sure, but not as attractive as a lease that loads the $7500 up front. (Also 4.25% is real high considering loans are running at about 2.25% still.)

Does it have the option to pay the balloon payment or turn the car in at the end like Ford Options?

 

[sithanas]

That’s what I was told but we ended up walking on the car (FE #974) because with them adding in a 5k markup the EV6 just didn’t feel worth the money, even with the balloon loan program. We might try again in a few months with a regular GT-Line or just wait for the full fat GT.

 

[Neutron]

That’s what I was told but we ended up walking on the car (FE #974) because with them adding in a 5k markup the EV6 just didn’t feel worth the money, even with the balloon loan program. We might try again in a few months with a regular GT-Line or just wait for the full fat GT.

Yeah that's the upside of me waiting... I'm curious what the price tag is gonna be on the GT.

 

[Sam_K]

I was having a private conversation on here with a friend of mine on here discussing this balloon payment program. I worked up some numbers comparing the balloon payment plan to a 6 year loan at 3% interest (and you can probably get less than that right now). The sales tax in my county is 8.625%. I'm going to assume the residual percentage on the GT-Line is 52% (instead of the higher 53% or 54%). From what I read online about the Ford Mach E balloon payment plan you have to pay sales tax on the full MSRP of the vehicle.

The following calculations are for a GT-Line in yacht blue with MSRP $57,640 which includes suede seats ($295), carpeted floor mats ($170) and wheel locks ($60).

Tax on full MSRP $57.640.00 * 8.625% = $4,971.45

Monthly payment calculation for the balloon payment plan
52% of MSRP = balloon payment amount (i.e. residual) = $29,972.80
48% of MSRP (financed amount) = $27,667.20
$27,667.20 (48% of MSRP) + $4,971.45 (sales tax on full MSRP) - $8,000 ($7500 federal + $500 NY state tax credits) = $24,638.65
Monthly payment on loan amount of $24,638.65 with 4.25% interest rate for 3 years = $730.17

Monthly payment calculation for a regular purchase using a 3% loan for 6 years assuming your down payment amount is the tax credits
$57.640.00 (MSRP) + $4,971.45 (sales tax) - $8,000 ($7500 federal + $500 NY state tax credits) = $54,611.45
Monthly payment on loan amount with 3% interest rate for 6 years = $829.75

The balloon payment plan saves about $100/month or $1200/year over a 6 year purchase loan and after 3 years if it's worth significantly less than the residual then I can turn it in and walk away. However, I have 2 issues with the balloon payment plan. First, if you turn in the car after 3 years then you've effectively paid extra sales tax on a vehicle that you don't own so you can't use it as a trade in to reduce the sales tax on the next car you buy. The second issue is with the interest rate of 4.25% in the balloon payment plan. That's high right now but maybe it won't be in a few months with interest rates rising.

 

[sithanas]

In VA we are stuck paying the full sales tax on leases too so the balloon payment plan is effectively the same as a lease--makes more sense here. The 4.25 is a shit rate though.

 

[Waynerm002]

KIA need to add some incentives like they normally do to make the deal palatable. I think that thing of you putting $7500 down to get it back as an incentive is typical dealer trickery. When leased the Audi e-tron, they kept the incentive but it was listed as a discount on the vehicle, totalling @ $20k off the price of the car before they worked the lease numbers. The equity on my Stinger paid for the down payment, fees and 1st month payment. Times are tough and these fools are looking for extra ways to rip people off. The whole dealership model needs a change.

 

[Sam_K]

In VA we are stuck paying the full sales tax on leases too so the balloon payment plan is effectively the same as a lease--makes more sense here. The 4.25 is a shit rate though.

Wow, I didn’t think any states would require you to pay sales taxes on the full MSRP when you lease. In NY we only pay sales tax on the total amount of the lease payments. What's strange about NYs leasing laws is if you roll the sales taxes into the lease payment then have to pay sales tax on the tax. I learned this many years ago when I couldn't calculate the exact lease payment the dealer calculated using online lease calculators.

 

[Waynerm002]

NY certainly want their money. In VA, if you buy out your lease, you don't have to pay any additional tax when you register the vehicle. Did this when I got some excellent lease deals on my Stingers, then got low interest loans from my credit union to buy out the lease.