Red Carpet Option??
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Junior User
Joined: May 2005
Posts: 51
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From: El Paso, TX
Red Carpet Option??
Well, my friend has come back from a local Ford dealer ready to buy a F250 PSD.They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l. However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo. Just wondering what experience anyone here has with the "Red Carpet Option" and any comments, suggestions.
Post Fiend
Joined: Feb 2004
Posts: 10,728
Likes: 1
From: Damascus-Boring, Ore
Well, my friend has come back from a local Ford dealer ready to buy a F250 PSD.They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l. However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo. Just wondering what experience anyone here has with the "Red Carpet Option" and any comments, suggestions.
I'm going to pick this apart a bit, because this is what a lot of buyers look at.
They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l.
There is no way in heck any layman could figure out what the "cash price" of the truck is with all the extra junk thrown in. I'm not a layman (30 years in the biz), and I don't have a clue. To understand a transaction, everything has to be broken out. The fact that he had negative trade equity means the dealer knew up front this wasn't going to be a cash deal, so the deal is structured differently right out of the box.
1) How much for the truck. then (equally important)
2) How much for the trade(s)
add in the trade payoff, if any, and we come to the
3)amount to finance, before
4)T,T,&L. Doc fees come into play here too- and they can be steep in some areas.
However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo.
Now we get to the meat of the negotiations. It sounds like your friend wasn't worried about "how much" as much as "how much a month." That's two completely different concepts. Let's say, for conversations sake, that the $39K was the amount to finance. That puts his payments at roughly $850 for 60 mo's, or $745 for 72 months. the Red Carpet option, @ $608/mo, sounds like a 48 mo lease. If it is, he makes $29000 in payments for 4 years and has nothing to show for it when the lease is done. Zip/Nada. Or, he can make $850 payments, and after 4 years still owe $12K on the truck...except chances are good that the truck will be worth more than $12K after 4 years.
The only people who come out on leases are the leasing company- never forget that.
I'm going to pick this apart a bit, because this is what a lot of buyers look at.
They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l.
There is no way in heck any layman could figure out what the "cash price" of the truck is with all the extra junk thrown in. I'm not a layman (30 years in the biz), and I don't have a clue. To understand a transaction, everything has to be broken out. The fact that he had negative trade equity means the dealer knew up front this wasn't going to be a cash deal, so the deal is structured differently right out of the box.
1) How much for the truck. then (equally important)
2) How much for the trade(s)
add in the trade payoff, if any, and we come to the
3)amount to finance, before
4)T,T,&L. Doc fees come into play here too- and they can be steep in some areas.
However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo.
Now we get to the meat of the negotiations. It sounds like your friend wasn't worried about "how much" as much as "how much a month." That's two completely different concepts. Let's say, for conversations sake, that the $39K was the amount to finance. That puts his payments at roughly $850 for 60 mo's, or $745 for 72 months. the Red Carpet option, @ $608/mo, sounds like a 48 mo lease. If it is, he makes $29000 in payments for 4 years and has nothing to show for it when the lease is done. Zip/Nada. Or, he can make $850 payments, and after 4 years still owe $12K on the truck...except chances are good that the truck will be worth more than $12K after 4 years.
The only people who come out on leases are the leasing company- never forget that.
Thread Starter
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Junior User
Joined: May 2005
Posts: 51
Likes: 0
From: El Paso, TX
Originally Posted by polarbear
Well, my friend has come back from a local Ford dealer ready to buy a F250 PSD.They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l. However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo. Just wondering what experience anyone here has with the "Red Carpet Option" and any comments, suggestions.
I'm going to pick this apart a bit, because this is what a lot of buyers look at.
They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l.
There is no way in heck any layman could figure out what the "cash price" of the truck is with all the extra junk thrown in. I'm not a layman (30 years in the biz), and I don't have a clue. To understand a transaction, everything has to be broken out. The fact that he had negative trade equity means the dealer knew up front this wasn't going to be a cash deal, so the deal is structured differently right out of the box.
1) How much for the truck. then (equally important)
2) How much for the trade(s)
add in the trade payoff, if any, and we come to the
3)amount to finance, before
4)T,T,&L. Doc fees come into play here too- and they can be steep in some areas.
However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo.
Now we get to the meat of the negotiations. It sounds like your friend wasn't worried about "how much" as much as "how much a month." That's two completely different concepts. Let's say, for conversations sake, that the $39K was the amount to finance. That puts his payments at roughly $850 for 60 mo's, or $745 for 72 months. the Red Carpet option, @ $608/mo, sounds like a 48 mo lease. If it is, he makes $29000 in payments for 4 years and has nothing to show for it when the lease is done. Zip/Nada. Or, he can make $850 payments, and after 4 years still owe $12K on the truck...except chances are good that the truck will be worth more than $12K after 4 years.
The only people who come out on leases are the leasing company- never forget that.
I'm going to pick this apart a bit, because this is what a lot of buyers look at.
They gave him a good cash price of $39xxx which included his negative equity on his trade-in, rebates and tt&l.
There is no way in heck any layman could figure out what the "cash price" of the truck is with all the extra junk thrown in. I'm not a layman (30 years in the biz), and I don't have a clue. To understand a transaction, everything has to be broken out. The fact that he had negative trade equity means the dealer knew up front this wasn't going to be a cash deal, so the deal is structured differently right out of the box.
1) How much for the truck. then (equally important)
2) How much for the trade(s)
add in the trade payoff, if any, and we come to the
3)amount to finance, before
4)T,T,&L. Doc fees come into play here too- and they can be steep in some areas.
However, they were pushing a "Red Carpet Option" on him. The payments are attractive $609/mo.
Now we get to the meat of the negotiations. It sounds like your friend wasn't worried about "how much" as much as "how much a month." That's two completely different concepts. Let's say, for conversations sake, that the $39K was the amount to finance. That puts his payments at roughly $850 for 60 mo's, or $745 for 72 months. the Red Carpet option, @ $608/mo, sounds like a 48 mo lease. If it is, he makes $29000 in payments for 4 years and has nothing to show for it when the lease is done. Zip/Nada. Or, he can make $850 payments, and after 4 years still owe $12K on the truck...except chances are good that the truck will be worth more than $12K after 4 years.
The only people who come out on leases are the leasing company- never forget that.
Truck price: $39000
Rebates: $6000
Neg. equity: $4000
Taxes: $2100
I honestly don't know what the hell is going on. Unfortunately my friend makes the age-old mistake of askin "how much per month"
I'm used to simply doing my own numbers, walking in and saying i'll pay cash and getting a bottom line price, regardless of whether I finance or pay cash, I just don't like to deal with BS. In fact, I walked out on a deal once because they insisted they had to run my credit in order to buy a vehicle. But he was only concerned with the monthly payment and I have a feeling he's gonna get reamed.
Post Fiend
Joined: Feb 2004
Posts: 10,728
Likes: 1
From: Damascus-Boring, Ore
It's confusing. The reason I say keep the transactions apart (for the benefit of anyone that reads this, not necessarily you), is that it's quite possible to sell a new vehicle for an attractive price, but then turn the whole thing into a home-run (for the dealer) by the time the trade and financing get factored in.
Senior User
Joined: Dec 2004
Posts: 184
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From: Northeast PA, USA, Earth
I don't think it's any secret that leasing is a expensive way to go, but in many cases it does make sense.
Sometimes it is difficult to get one's head around the concept of a vehicle as an expense rather than investment. Once you grasp that, leasing really isn't that bad of a deal. If you put a fair amount of miles on the vehicle, and would like to have a new one in a short period of time (2 or 4 years), then leasing should be looked at.
I didn't lease mine, but I did want to do a fair amount of modification for my particular needs. I can still trade at any time, but I don't have to have that feeling that I'm modifying someone else's vehicle.
Particularly for business buyers, it is far easier just to expense the lease rather than deal with the multiple cost factors involved in a purchase. If the point is whether or not you can make money with the vehicle, leasing makes the calculation so much easier.
Sometimes it is difficult to get one's head around the concept of a vehicle as an expense rather than investment. Once you grasp that, leasing really isn't that bad of a deal. If you put a fair amount of miles on the vehicle, and would like to have a new one in a short period of time (2 or 4 years), then leasing should be looked at.
I didn't lease mine, but I did want to do a fair amount of modification for my particular needs. I can still trade at any time, but I don't have to have that feeling that I'm modifying someone else's vehicle.
Particularly for business buyers, it is far easier just to expense the lease rather than deal with the multiple cost factors involved in a purchase. If the point is whether or not you can make money with the vehicle, leasing makes the calculation so much easier.
Thread Starter
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Junior User
Joined: May 2005
Posts: 51
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From: El Paso, TX
I agree, unless it is business expense, I probably won't be leasing personally. However, when I looked at Ford's web site, they show the "Red Carpet Lease" and the "Red Carpet Option".
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Senior User
Joined: Dec 2004
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From: Northeast PA, USA, Earth
Red Carpet Option (RCO): A retail installment contract with a balloon payment at the end of your term. This option combines the customer ownership features of retail financing with the benefits generally associated with leasing. Contract terms are 24, 36 or 48 months and there are many mileage options to meet your driving needs. At maturity, you have the option to pay off the balloon payment amount, refinance the balloon payment or sell the vehicle to Ford Credit (subject to payment of any excess miles, excess wear and use charges, outstanding payments and any applicable disposal fees).
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