Calculating Ford Lease Payments
Ford APR Method
The interest rate quoted by Ford dealers will not represent the true APR of the
lease. This is because Ford adds an administrative fee of approximately 0.00111 times the
cap cost to each monthly payment. This makes the monthly payments fell about 1.5% higher
than the rate quoted by the Ford dealer. Consider the sample Ford lease below:
Cap Cost = $21,400
Residual = $16,683
Months = 24
Interest Rate Quoted by Dealer: 9.0%
The Ford Payment would be the monthly payment at 9% using the constant yield
method plus 0.00111 times the cap cost, or
$338.08 + $21,400 (.00111) = $361.84
The equivalent APR for this monthly payment stream is 10.5%.
This hidden fee can add up to a significant amount of money, particularly on
more expense vehicles. For example, the fee on a vehicle with a $25,000 cap cost is $27.75
per month times say 36 months. This adds up to a whopping $999.00!
Investigations and Lawsuits
In November of last year, Florida's Attorney General announced that Ford Motor
Credit and it's dealers are the target of a 22-state investigation looking into Ford's
allegedly deceptive practices under it's Red Carpet leasing program. The AG's are
investigating such practices as pay packing, failing to properly credit trade-in's and
cash payments, secret price increases, and misrepresenting the cost of lease transactions.
Class action suits against Ford Motor Credit have now been filed in over
30 states. The lawsuits allege deceptive lease practices and fraud.
For the above reasons, we strongly recommend
against leasing from Ford dealers through Ford Motor Credit.
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