Ford has taken away minimum credit score requirements for long ass 84-month loans, as Cars Direct reports. For those not in the know, this is not a good thing.
On the surface, these loans look good. The longer the term, the lower the payments. This has been winning over buyers that are on the fence about a vehicle they want, but the payments aren’t working for them; long loans have only gotten more popular as of late. The pandemic in particular saw an increase of loans longer than 70 months, thanks to customers facing higher prices on new and used cars and automakers themselves becoming more desperate for buyers as sales took a nosedive.
Ford saw all this and rolled out zero percent APR for 84 months late last year. To get that zero percent APR, though, you had to have good credit. This is no longer the case.
In removing the minimum score requirement, Ford has opened the floodgates for more buyers to be put in precarious financial situations. Americans’ debt situations are already out of control, and this isn’t helping. But that’s not how Ford sees it. A rep from the company told Cars Direct that it will make sure that buyers will be able to repay.
Our proprietary scoring models do an excellent job of assessing the probability that an applicant will be able to pay. FICO is one input. Eliminating the separate FICO requirement opens the prospect of financing to more customers who would qualify for 84-month financing within our models regardless of their FICO score.
While they may have scoring assessments, it doesn’t change that these long terms are open to more buyers than before. Plus, this doesn’t address all the interest someone will pay over the course of the loan at this length.
For instance, a buyer with a score in the mid 600s comes in on a Bronco Sport Badlands. With a few options, the MSRP is just under $40,000. If they get a 6.9 percent rate, with $5,000 down for 84 months, that person will be paying nearly $9,000 in interest. If you’re one of the buyers out there currently shopping, don’t get lured or talked into longer terms because of lower payments. If you can, stick to 60 months. You may have higher payments, but you’ll be financially better in the long run.
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