What Happens to the Equity You Have at Lease End? Ford and Others are Alleged to Block Consumers From Getting It

Ford Motor Co.’s consumer credit arm enforces illegal leasing policies that prevent lessees from capturing the full amount of equity that accrues on their vehicles as a result of overpayment, a proposed class action filed Tuesday in California court said.
Named plaintiff said Ford Motor Credit Co. LLC’s policy of not allowing lessees to sell their leased cars directly to third parties and instead requiring them to first buy the vehicles outright themselves cheats consumers out of the full value of their cars’ equity because they are forced to pay thousands of dollars in sales tax out of pocket to make the transactions happen.
“The commercially unreasonable restrictions that were imposed on Plaintiff were completely and totally unnecessary, and were specifically designed by Ford to deter the consumer from being able to cash in on the equity of the vehicle the consumer paid for,” the plaintiff said.
According to the complaint, the 2008 recession created a shortage of quality used vehicles on the market and forced lessors to become more conservative in drawing up leases. In the years that followed, those factors caused previously leased vehicles nearing the end of their lease terms to become worth more than the amount owed on the leases, because the conservative contracts overpredicted depreciation.
A portion of each lease payment is intended to pay for depreciation on the leased vehicle.
In the cases where consumers paid more in lease payments than their cars were worth, equity accrued. Consumers can cash in on that equity by buying the car and reselling it.
In January, the Plaintiff, who was leasing a Ford, contacted Ford Motor Credit to sell the car to a third-party dealership to cash in on his equity. The complaint said Ford Credit told him that in order to sell the car to a third party, he would first have to purchase it himself and pay taxes and licensing related to the purchase.
That, according to the complaint, violates the Moscone Vehicle Leasing Act and constitutes unfair competition by placing “unreasonable restrictions” on the consumer that made it impossible for him to capture his “rightful” equity in the vehicle.
“Ford Credit has designed a lease which is so conservative as to be structured in a manner wherein vehicles accumulate equity,” the complaint said. “Unfortunately Ford Credit is trying to block consumers from enjoying the accumulated equity by imposing commercially unreasonable and unfair restrictions on consumers trying to cash in on that equity, that they paid for.”