How Much Ford Can A Ford Line Worker Afford?

Last week Ford announced that it had delivered a seventh new offer to the United Auto Workers union collective bargaining team. In this offer Ford detailed raises for temp workers, promised zero job losses due to EV battery plants coming online, an immediate 20 percent pay raise, better retirement benefits, better health care, destruction of the tiers system, and most importantly for this exercise, a reduction in the time it takes for average line working employees to reach top-tier wages. Ford claims “average new hires will earn six-figure salaries by their 4th year.”

2024 Chevrolet Colorado ZR2 Bison | First Drive

While the UAW has not yet ratified a deal with Ford, this seems like a big step in the right direction from the blue oval company. Elevating its workers to middle-class earning status in just a handful of years with the company is pretty solid. It seems like the last thing the company needs to deliver for a UAW deal is allowing its joint-venture battery plants to be represented by the union. Once the two parties come together on a finalized deal, Ford employees will certainly be capable of earning a living wage, and then some.

In January of 1914, Henry Ford raised his employee wages to $5 per day. This wasn’t a philanthropic move, far from it. Not only did this pay increase create some incentive for employees to stick around and curb turnover, but it also proved a great marketing ploy as Ford employees were suddenly in a position to purchase themselves a brand new Model T. By 1920, the company was selling over a million Model Ts per year.

“We increased the buying power of our own people, and they increased the buying power of other people, and so on and on,” Ford wrote. “It is this thought of enlarging buying power by paying high wages and selling at low prices that is behind the prosperity of this country.”

So here comes the question. The big question. The one we’re going to do some math to try to figure out.

Can The Ford Workers Of Today Afford To Buy A Ford?

Based on a few job listings I’ve seen for Ford assembly workers, your starting pay is somewhere around 40 to 50 grand a year. If you’re a single person operating on that level, it’s unlikely you’ll be able to afford anything new anyway. But what about when you hit that four-year mark, and you’re making the magic ‘six-figure salary’ that is mentioned in the union proposal?

For the purposes of this exercise, we’re going to assume a Ford worker that makes the least amount still considered six-figure salary, $100,000. And for the hell of it, we’re going to base this on someone who works in Dearborn, Michigan.

To know what you can afford to buy on today’s new car market, you’ll have to calculate take-home pay. A worker making $100,000 is going to want to chuck some of that money into a retirement account, and most financial advisors recommend 10 pecent of pre-tax income as a goal. That’s good, because the government can’t take it from you if it’s in a 401K, and hopefully Ford pitches in a bit of matching. According to a Forbes income calculator, a single-filing worker earning $100,000 and putting $10,000 in a 401K is taxed $12,568 at the federal level, and $3,613 goes to the government of the mitten. That puts take-home pay at $73,820 annually, or $6,151 per month.

Listen to any financial guru you want to, whether that’s Suze Orman, Dave Ramsey, or Caleb Hammer, and they’re going to tell you that you shouldn’t spend more than 10 percent of your take-home on a car payment. For a shitbox sommelier like myself, that’s hardly a problem, but if you want a new car you’re suddenly backed into something of a corner. The average new car payment today is $729 for new cars and $528 for used cars. This theoretical six-figure earner can afford no more than $615.10 per month for their car.

What About Ford Employee Pricing?

Ford employees are eligible for A Plan Pricing, which is calculated in a somewhat confusing way. A Plan is dealer invoice minus dealer holdback, minus the advertising fee, and plus a $275 program fee. This makes the actual cost of an A Plan car a little difficult to calculate. Dealer holdback is 3 percent of MSRP, and Ford’s ad fee is somewhere between $275 and $860 depending on region. I couldn’t find what Ford charges for an ad fee in southeast Michigan, so I picked the exact middle of the two ends, giving us $567.50, though that could vary. There’s no telling exactly what dealer invoice will be on a given car, but based on some chatter on Reddit, dealers tend to get a 5 percent margin between invoice and MSRP for high-turnover Ford products. Again, this will vary by model, dealer, state, etc.

So to find the A Plan price of a given car, we take the MSRP, deduct 5 percent to get a ballpark dealer invoice, deduct 3 percent for holdback, remove another $567.50 for ad fee, and then add back in $275 for the program fee. Let’s simplify that:

A Plan Price = MSRP – 8 Percent – 292.50

To figure out how much car this theoretical person can afford, we’ll have to make a few more assumptions about them. They’re a single-income person living alone, and they have excellent credit, let’s say something over 800 (average FICO score is 714).

If they can afford a monthly payment of $615, we can work backwards to figure out how much car they can actually buy. By using NerdWallet’s price calculator, we can input a monthly of $610 and a proposed (though not recommended) loan term of 84 months. Given a high credit rating, this person can probably get a decent APR today of around 5 percent, meaning they can afford to finance $43,058.34, and by the time you’re done paying on the car, you’ll have paid $8,181.66 in interest.

To that A Plan price we’ll have to add 6 percent for Michigan sales tax, plus around $250 for new car registration fees. Tax, title, and license can be financed, so we’ll add that to the total amount paid. Remove all of that from your financed vehicle, and you’ve got a total financed cost of $40,385-ish.

What Can You Buy For $40,385?

Now we know how much this person can afford to finance. We’ve solved for their maximum theoretical A Plan Price. Now we have to solve for their maximum theoretical MSRP. [Of course this assumes they haven’t saved any money for a down payment. Add as much as you want in cash to this calculation.]

$40,385 = 0.92X – 292.50, solve for X

It looks like they can afford a car priced under $44,214.67.

Most Ford vehicles at least offer a starting price under that number. Our theoretical Ford worker could finance an Edge, Explorer, Bronco, Bronco Sport, Escape, Mustang, Maverick, Ranger, F-150, or Transit Connect. They absolutely cannot afford a Mach E, Transit, Lightning, or Expedition.

If they want a fun daily driver, a Mustang Ecoboost Premium Fastback is in their price range, but a no-options stick GT is just a smidge over.

Ford is really pushing their electrified options right now. What could this theoretical buyer afford in a hybrid Ford? Obviously the Maverick is a good choice, but if you’re looking to save a bunch of cash and get some government incentives for buying something with a plug, the Escape PHEV starts at $40,500.

What About Leasing?

Okay, so now that we’ve done all of that calculation for a new vehicle purchase, what if you don’t want to own the vehicle? What if you just want to have an appliance that you drive for a few years and turn in? Well, most lease deals will require a decent chunk of cash as a down payment, so we’ll just have to assume they have that money saved. The median savings balance for American households is $5,300, so we’ll venture they have at least that much in their account for a down payment.

Ford’s lease deals right now allow our theoretical car shopper to buy some pretty fancy stuff. An F-150 XLT, for example, would max their budget with $5,009 due at signing and $615 per month for 48 months. Likewise, a Mustang GT Fastback would run $5,026 due at signing, plus $617 (they can stretch two dollars) per month for 48 months.

So Ford Employees Making Six Figures Can Afford A Ford?

With some extremely expensive exceptions, it looks like Ford’s six-figure makers can afford to buy most of the cars on the lot. They may not be able to stack them up with many options, and they certainly can’t get the best versions Ford makes, but they’ll be allowed to live comfortably, or to have a little fun with a Mustang four-cylinder. And really, is that too much to ask?