Deceptive Interest Rate Quotes
Ford’s method of calculating and quoting interest rates on leases allowed its dealers to deceive their customers into thinking that they were getting lower rates. And since the company did not provide written disclosure of the actual rates, dealers were free to quote any rate that sounded good, without fear of getting caught.
In many cases, the actual interest rates on Ford leases were about 1.5 to 2.0 points higher than those charged by other lenders. Quoting lower rates obviously helped dealers to convince people that their leases were “good deals,” even though the rates may have been deceptive. (Recent quotes obtained from a number of Ford dealers understated the actual interest rates by about $30 a month on one particular vehicle.)
Ford’s “rate discrepancy” is due to a hidden administrative fee that the company adds to its monthly finance charges, but only the “base rate” is used when quoting rates to customers. The undisclosed part of the finance charges causes the real APR to be a lot higher, so if a dealer tells you the “rate” on a lease is 9.0%, it’s probably closer to 10.75%.
The company’s RCL dealer handbook explained this hidden fee in a question-and-answer section: “Q: Is a lease factor like 10.50 the same as a 10.50% APR? A:
No. The lease monthly payment may include local fees, where applicable, and an administrative fee of 1/9 of 1% of the acquisition cost. The implicit rate to the customer is approximately 1.75% point higher than the stated factor.” [emphasis mine]
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