Several years ago, as costs of private vehicle ownership started to increase, automotive industry experts began to examine ways to deal with these rising prices. Ford Credit's Red Carpet Lease plan is a modern alternative to owning a new vehicle. A lease has the potential to put you in a more luxurious vehicle or a vehicle with more options than you might get through a finance contract for a similar monthly payment. With a Red Carpet Lease, your initial cash outlay is usually lower than the cash investment needed in the financing of a retail purchase.
What's the difference between buying and leasing a vehicle? Put simply, when you buy, you either finance or pay cash to pay for the total cost of the vehicle. When you lease, you don't have to pay for the entire vehicle. You pay only for the portion of the vehicle's worth that you will use.
Exactly how are lease payments determined? Lease payments are determined on the basis of the vehicle's Guaranteed Future Value. Let's say you want to drive a new $15,000 car for two years. If you financed your purchase you would probably be faced with some hefty monthly payments. However, if you choose a Red Carpet Lease, Ford Credit doesn't make you pay for the whole value of the car. Instead, Ford Credit estimates what your car will be worth after those two years of driving (this amount is the lease-end value or Guaranteed Future Value) and deducts that amount from the original purchase price.
Let's assume that in the above example Ford Credit determines that the Guaranteed Future Value of the car is $7,500. Since you won't be using this portion of the car's worth, it's deducted from the original $15,000 total purchase price. That means your Red Carpet Lease payments are based on the portion you will use --in this case, $7,500-- plus a lease charge based on the total price.