Ford Motor Co. will be suspending end-of-lease buyout options for customers driving all-electric vehicles, provided they took possession of the model after June 15, 2022. Those who nabbed their Mach-E beforehand will still have the option of purchasing the automobile once their lease ends. However, there are some states that won’t be abiding by the updated rules until the end of the year, not that it matters when customers are almost guaranteed to have to wait at least that long on a reserved vehicle.
The change, made earlier in the month, cruised under our radar until a reader asked for our take over the weekend. Ford could be wanting to capitalize on exceptionally high used vehicle prices, ensuring that more vehicles make it back into rotation. The broader industry has likewise been talking about abandoning traditional ownership to transition the auto market into being more service-oriented where manufacturers ultimately retain ownership of all relevant assets. But it may not be that simple as this being another step in the business sector’s larger plan to maximize profitability by discouraging private vehicle ownership.
Truth be told, EVs don’t typically hold their resale value all that well. While there are certainly exceptions to that rule (e.g. Tesla products), it has remained true even after fuel prices hit new records. One explanation could be the fact that battery-powered vehicles tend to become obsolete rather quickly — kind of like a laptop or cellular phone — due to the relative infancy of the technology and subsequent development efforts. Benefits aside, there are also lingering questions about battery lifespans, the costs associated with replacing one, and how long it will be before something better can be obtained.
We’ve also been getting warnings for years that the odds of battery production reaching a scale that would support widespread EV adoption would be slim. Material shortages have already begun to manifest and have been made worse by two years of diminished productivity stemming from COVID lockdowns. The industry knows it’s going to have a deficit of the most essential components of all-electric vehicles moving ahead. This, combined with batteries likewise being the most expensive item installed into EVs, may explain why Ford wants to keep them on a tighter leash.
Ford didn’t go into quite that much detail and simply explained that it wished to keep the vehicles within its own network so it could better manage recycling and the raw materials. But it doesn’t take a lot of imagination to see why battery hoarding might be on the table if the above complications are to remain in effect. If the Blue Oval cannot source the necessary hardware from suppliers, retaining what it has now is the logical response. But raw materials may not be the only factor at play here. We’ve seen other automakers restricting what customers can do with their leases (e.g. General Motors) ever since vehicle supplies became strained in 2021. Though you’ll have to decide whether it’s a necessary move to help offset a deficit of vehicles or simply a shrewd way of wrangling control of the secondhand market.
The Mach-E is also under a comprehensive recall relating to defective battery contacts the manufacturer is worried could overheat. Battery fires have done a lot to undermine EV adoption around the globe. Even the mere possibility that an electric car might flambé itself in a garage warrants a lot of attention due to how difficult battery fires are to manage, so the press rarely skips an opportunity to report on them. Ford’s issue with the Mach-E hasn’t resulted in any known injuries, but there’s a chance leadership thinks the company’s odds might be better if it could guarantee more came back through a service center. Perhaps the Blue Oval simply doesn’t like the idea of customers owning battery-powered vehicles of an advanced age.
We could speculate on the why of this decision endlessly. But your author is inclined to believe it’s a conglomeration of issues with the recall issue being of lesser importance than Ford realizing that it might soon become exceptionally difficult to source batteries. The same goes for the company wanting to pivot toward more leasing, especially since the industry often talks about how the broader premise of “mobility” that often includes placing curious limitations on vehicle ownership. It hasn’t even been a full month since Ford CEO Jim Farley suggested fundamentally changing the entire business. This included suspending traditional advertising campaigns, killing the existing dealership model, and moving to online-only sales where customers cannot negotiate on price.
“We’ve got to go to non-negotiated price. We’ve got to go to 100-percent online,” Farley said at the Bernstein 38th Annual Strategic Decisions Conference held at the start of June. “There’s no [dealer] inventory, it goes directly to the customer. And 100 [percent] remote pickup and delivery.”
This kind of talk often coincides with industry leaders promoting their own financial services arm, finding new ways of keeping customers tied to the current brand, and prioritizing new modes of business where the manufacturer retains ownership of the vehicles they’re “selling.” Ford certainly has discussed those topics in the past, however, the play to nix lease buyouts hasn’t yet overlapped. Though all automakers are pretty consistent in feeding us the same lines whenever those schemes are questioned.
“Ford Motor Company is committed to making Battery Electric Vehicles (BEVs) more sustainable and affordable for our customers by localizing the complex battery supply chain network, creating recycling options for end-of-life vehicles, and increasing U.S. battery production,” Ford explained in a dealer memo about the new leasing rules. “The purchase of the BEV Lease is to aid in our goal of delivering carbon neutrality by 2050 by controlling the vehicle battery through its life, keeping it in the Ford network.”
While leasing customers will not be able to buy their EV, Ford Credit will allow them to renew an expiring contract in exchange for a brand-new model. Amazingly, the manufacturer is trying to frame this as environmentally responsible. But it smells like planned obsolescence and desperation from where I’m sitting. Ford knows that electrics require far less labor to produce. By also retaining/recycling the most-expensive component (the battery) it can effectively maximize profitability on a three or four-year turnaround.
For now, the updated leasing scheme is limited exclusively to all-electric products (e.g. Ford Lightning or Mach-E “Mustang”) sold in 37 individual states. But the long wait times for new EVs and Ford’s desire to expand the plan through the rest of the year effectively means it’ll be national by the time most people take ownership.
[Images: Ford Motor Co.]
Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by subscribing to our newsletter.
So it is a 2-3 year rental then? I would treat it as such by using the accelarator as an on off switch, only fast charging it and ensuring the battery is at absolutely 100 percent when parked and deep cycled as often as possible. Releiving in a way since any future battery issues would not be a me problem.
So you will try to intentionally destroy fully functioning product just because it does not belong to you? Don’t you find such an attitude regrettable in 21st century when we trying hard to save resources?
Communist nonsense.
People are far more likely to take care of property when they own that property.
If we really want to encourage responsible development of limited resources and we want people to be good stewards of those resources – then those resources should be privately owned.
Any car I’ve leased I haven’t leased because I wanted to keep it, I leased it because I wanted it to be gone before it became a problem.
However I took excellent care of them with respect to maintenance (though I did hoon them a bit but they were all cars you’d expect that on) because there was always the off chance I’d buy it.
Taking that out of the equation would relieve me of that burden. It’s not my job to buy something and keep it nice so you can get a CPO deal when it’s 3 years old. You want new? Buy new.
BEV subscription. You never own the vehicle.
Wouldn’t affect you on a buy.
I wonder how many people who lease a BEV buy it at the end. Perhaps the number is high right now due to shortages, but can’t imagine that being the case in the mid-long term. Technology and design are moving too quickly for this kind of action. Plus Ford doesn’t exactly have the best reputation for long term reliability.
I think most folks who lease any kind of vehicle don’t buy it at the end.
Good question. Just my experience:
12 Leaf 1.0 – returned at the end of the lease. Nissan’s offer to reduce the buyout price from $18k to $13k was a joke, given that the car ended up on a 2nd-hand lot for $9k, and probably went for $6k at auction. They refused my $9k offer to buy it. Its battery health was terrible after 3 years.
19 Ioniq 1 – bought it at the end of the lease last fall. Far superior to the Leaf 1.0, its battery is still 100% healthy. Current market conditions made my $13k buyout look like a bargain for a car with 36k miles, and today it costs 1/10 as much to drive as our gas car.
Even without the wacky market, I still might have kept it. I don’t need a $50k EV for my 1000-miles/month driving. But I don’t expect it to have much value in another 3 years.
I don’t buy the conspiratorial “EVs are here to sap and impurify all our precious bodily fluids” stuff; if it were, then it’d be ALL Ford EVs coming back to them after two or three years. As it is, only leased vehicles are affected, and I’m sure they’re not going to just crush the returned vehicles, so there’s more at play.
My guess is the purpose of this is to see what happens to their batteries after a couple of years of real-world use, and to bring the used batteries up to snuff before resale to the off-lease customers.
As the writer points out, resale values of EVs aren’t all that hot; maybe freshening the batteries is one way to fix that.
“EVs don’t typically hold their resale value all that well. One explanation could be the fact that battery-powered vehicles tend to become obsolete rather quickly — kind of like a laptop or cellular phone — due to the relative infancy of the technology and subsequent development efforts. Benefits aside, there are also lingering questions about battery lifespans, the costs associated with replacing one, and how long it will be before something better can be obtained.”
Agree. Let Ford own the risk.
Ford will own the tech risk; buyers will own the financial risk.
I would hate being unable to buy a leased car that I ended up liking.
*Cough* EV1 *Cough*
Yes this appears to be what GM did with the EV1 which is lease them and then force them to be returned and crushed. I am in no hurry to buy an EV. I will wait till the batteries get better and less expensive and the infrastructure gets better. I currently have 2 good fairly new vehicles and very low low mileage that I can easily keep another decade or more. Not to say I would never own an EV but I will wait.
Except GM made about 1,000 EV1s, so it didn’t care about crushing them. Ford is going to pass up reselling hundreds of thousands of units?
I have no idea what Ford’s game here is, but taking them back just to crush them clearly isn’t it.
@FreedMike–Anyone’s guess what Ford’s plan is. Ford might refresh their EVs at the end of the lease and lease them again but at some point if Ford does not sell them they will have to scrap the old EVs because they will not last indefinitely and Ford is in the business to make money selling or leasing new vehicles which they manufacturer. As some say this might be a way for Ford to test the battery technology and refresh existing EVs with new batteries with better technology. Eventually the vehicle shortages will go away and there will be enough vehicles for everyone who wants them. Shortages will not last forever.
This is nothing like the EV1. The EV1 was a hand built experiment full of hand built parts that were produced in just enough quantity. There were no replacement parts to keep them alive and even if there were the cost would have been prohibitive and many simple failures or something just wearing out would have doomed them to the scrap yard.
They’re just following Tesla’s lead. It seems both Ford and Tesla see hyper-inflation in the future.
Maybe they do see hyper inflation but I as a consumer can cut my consumption and buy just what I need and no more. If enough people will cut down on their consumption it would cause prices to eventually stabilize and possibly go down but I would be happy with stabilized prices.
“If enough people will cut down on their consumption it would cause prices to eventually stabilize .”
People in Zimbabwe cut down their consumption until they literally starved to death. Which, of course, had exactly a big, fat zero effect on inflation.
Even Milton Friedman, in one of his more lucid moments, recognized “inflation is always and everywhere a monetary phenomenon.’
Until/unless Ford stops selling them outright, this is a non-issue.
That’s a bet I would probably take.
Every few months the industry groups and CEOs discuss the merits or “reimagining” vehicle ownership into what would effectively be a lease only model where dealerships are basically just service/pickup centers.
I don’t understand the suggestion that Ford wants to harvest components from off lease vehicles. They aren’t going to scrap a 3 year old Mach E for parts. Maybe they will lease them again as used vehicles
Maybe swap in a new battery for resale?
We’re all guessing here anyway.
This feels like fighting today’s battle tomorrow. OEMs are doubtless taking a bath on lease buyouts right now. Even though a small minority of consumers are with-it enough to understand why they should buy the vehicle, the OEM is going to be losing thousands of dollars in each transaction, so it adds up.
But I’d think it would be better to adjust to reduce the risk than to foreclose the buyout entirely. At best (for the OEM) the results are the same as what they’ll get with this change. At worst they’ll be leaving some potential profit on the table.
I humbly propose that Ford meant exactly what they said:
“Ford Motor Company is committed to making Battery Electric Vehicles (BEVs) more sustainable and affordable for our customers by [A] localizing the complex battery supply chain network, [B] creating recycling options for end-of-life vehicles, [C] and increasing U.S. battery production,” Ford explained in a dealer memo about the new leasing rules. [D] “The purchase of the BEV Lease is to aid in our goal of delivering carbon neutrality by 2050 by controlling the vehicle battery through its life, keeping it in the Ford network.”
A) Mining/shipping all over the world is relatively difficult; recycling in the U.S. is easier, and easier to control
B) The battery in a current EV represents a significant portion of the value of that vehicle — why let anyone else capture the value of those materials when your customer just drove the vehicle back to your lot — it’s in your possession just keep it
C) If you have the materials in the U.S. (and now you do), you can produce new batteries in the U.S. (which is the way the wind is blowing this month)
D) Get the dirty parts out of the way up front and start more of a sustainable production stream
Take this to its logical conclusion. The age of your battery, motors and body can vary….while it has always been part A Slot B, and engine swaps aren’t new, here it could be almost Lego simple-no emission certifications, no super complicated ICE wiring harness. Need a minivan for family ? The sedan battery and motor could slot in, and you can still sell the shell.
Very sustainable, the industry still makes money, but there would have to be standardization of the battery and engine mounting.
@speedlaw–That makes sense. Go even further that the body shell could be recycled and the motor itself could live on along with the battery back which could be refreshed with new cells. Not much to wear out on an electric motor.
Over 100 years of ICE manufacturing has not resulted in standard mounts and driveline interfaces.
I’m not holding my breath waiting for standard motors and batteries.
That could be true but it would make it easier for manufacturers to refresh EVs with new batteries and new motors and offer existing vehicles for lease. In many cases only the software could be updated.
This would be a deal breaker for me. You have no leverage on what they can charge you for wear and tear and this would incentives them to screw you. Oh but wait, a dealer would never do that.
It would be a deal breaker for me as well. This might not work once the Chinese and others enter our marketplace with their own EVs and offer more competition.
More proof Ford wants no part of EVs. Ford sees them for the boondoggle they are.
Ford “wants no part of EVs” so much that it is insisting on getting them back at the end of lease terms? OK.
The old way of doing business was to sell the customer a product in return for a one-time payment. The customer would keep the product for several years during which the seller’s only source of income would be charging for maintenance. This was a real problem for the seller if the customer kept the product until it wore out.
The new way is to rent the product so that the seller enjoys a continuous stream of income as long as the renter keeps it. Even if both ways cost the customer the same in the long run, the rental business model makes life much easier for the seller. (I suspect the rental model is more expensive. It’s equivalent to a car loan on which the customer pays interest indefinitely without reducing the principal.)
If I had to guess, this is really about self driving cars. Fully self-driving EV make excellent taxi service type cars. They’re relatively low cost, and it’s much easier to manage the charging requirements in an automated fleet situation than on an individual basis.
I suspect Ford’s thinking once self-driving comes in, in a few years, most of the people who would have leased EVs are going to be just as happy to rent them on demand, and they’ll have a big inventory of good, and depreciated, EVs to convert into a Ford Self-driving cab fleet.
It’s unlikely Ford has any real-economy reason at all, for this.
Instead, it’s about what they can get away with claiming the value of the supposedly incoming batteries is. Then pay some bonuses, buy back some stock…
And then, another “we could never have foreseen they wouldn’t be worth much. In order to save the planet, productive people needs to be robbed some more to shore up their prices. Otherwise, scary Putin gets to sell more oil!”
It’s America. In the DumbAge. Not some quaint imaginary constellation of competent, literate people. The very last remaining of those guys, were flushed out of US boardrooms and executive suites well over a decade ago. To make room for monkeys who “made money” the post 1971 American way: By The Fed stealing it from productives and redistributing it to rank retards. As well as by having kangaroo courts ditto.
> Material shortages have already begun to manifest and have been made worse by two years of diminished productivity stemming from COVID lockdowns
You know, having several of your employees being amongst the 6.3 million deaths from covid-19 also diminishes your productivity. That number would be considerably higher if those lockdowns had not occurred.
This is almost certainly about residual value and that Ford has found, like Tesla, that the residuals were too low and that they could make more money by taking back the end of lease vehicles and selling them as used vehicles. If they raise the residual values, then the lease payments are too low to make money on as they use the difference between sale price and residual price as the basis for the lease payments (plus margin, interest and some other costs).
There is nothing stopping anyone from leasing a vehicle from a third-party finance firm. I seriously doubt that Ford can prevent this. There are lots of these options. Hell, half the minivans leased in NYC are from independent leasing companies judging by the license plate holders.
All that has happened is that Ford Motor Credit will not offer buyouts on leased EVs.
But, hey, who am I to get in the way of the usual sturm and drang decrying the fall of western civilization as we know it?
“Amazingly, the manufacturer is trying to frame this as environmentally responsible. But it smells like planned obsolescence and desperation from where I’m sitting.”
You know I am not a fan, but I see it as Ford wanting to collect (and destroy) Mach-Es which are afflicted but whatever the battery issue is recently. I read somewhere its $25K out of their pocket to fix it, $0 to take it back after lease.