Ford Credit on Wednesday said that it will offer its Red Carpet Option (RCO) Plan in Rhode Island in early April in response to outdated laws that hold leasing companies responsible for accidents involving their leasing customers.
Rhode Island is one of only three states that have lessor vicarious liability laws that hold leasing companies liable in accidents and the laws in these three states have resulted in huge payouts by leasing companies to resolve litigation.
Finance companies, banks and independent vehicle leasing companies face several billion dollars in potential payouts involving hundreds of open vicarious liability lawsuits. Such payouts could potentially add to the costs of purchasing, leasing and insuring vehicles and have the potential to eliminate leasing altogether.
Ford Credit executive vice president A.J. Wagner said, “Vicarious liability lawsuits will cause consumers to pay more for leasing and they will have fewer and more expensive financing options. It’s critical to the future of the Rhode Island leasing industry that the legislature reform the vicarious liability law and bring it into line with the laws in most other states.”
During the launch and transition phase of RCO, Ford’s traditional leasing product, Red Carpet Lease, will continue to be available concurrently with the new product. If the legislature fails to reform the law soon, Ford Credit will discontinue leasing in Rhode Island.
RCO is a Ford Credit plan under which retail instalment contracts are written with a final balloon payment. RCO is designed to offer customers the ownership features of retail financing along with the major benefits and flexibility generally associated with Red Carpet Lease, as well as the option and benefit to turn the vehicle back to Ford Credit when the balloon is due with no residual responsibility. Thus, the customer is able to retain the benefits of leasing without Ford Credit holding title to the vehicle.
Bob Tasca, a Ford dealer and president of the Rhode Island State Auto Dealers Association said, “Leasing is obviously a very popular choice since more than half of our customers in one dealership alone lease their cars and trucks. We’re very concerned that they will lose the ability to choose this financing option. Any increase in vehicle costs could compromise their ability to afford new vehicles.”