Buyout Begone: Ford Says You Can Never Own Leased EVs
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.]
Bunkie on Jun 29, 2022
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?
28-Cars-Later on Jun 30, 2022
"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.
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