Should I Send $550 Back to Ford?

(Photo: zaneology)

(Photo: zaneology)

My family liked our new Ford C-Max hybrid so much that we bought a second one just a few months later.  But in between the two purchases, I learned something that made me think that in buying the second car I might also be buying a cause of action. 

Before the second purchase, I learned that Richard Pitkin of Roseville, Calif., had brought suit against Ford for overstating the C-Max’s fuel efficiency.  It apparently is too good to be true that a C-Max can achieve 47 mpg both in the city and on the highway.  

Sure enough, two weeks ago, two $550 checks arrived in the mail because Ford had dropped its official mileage estimate from 47mpg to 43mpg.  Ford calls the money a “goodwill payment.” 

The company says that the $550 represents the cost difference between what a car owner will end up paying at the pump and what they were led to believe they would pay.  

I’ve had a hard time replicating their estimate.  In this spreadsheet, I assume that the gas will cost $3.50/gallon (about the 2-year average) and that the car is driven 15,000 miles/year (the EPA’s average estimate) for 10 years and that C-Max owners can invest their goodwill payment at an interest rate of 5 percent.  With these assumptions, I estimate that the compensating payment should have been $802 per car – about 46 percent higher. 

My estimate also crucially assumes that the true fuel efficiency is the revised Ford claim of 43 mpg.  If you’re getting the average gas mileage my cars are—34 mpg (which blinks cheekily on the dashboard every time I turn the car on) then the estimate jumps to almost $3,300.  

Fuelly.com—a crowd-sourced fuel economy aggregator—reports that the most common mpg number for the C-Max is 40mpg, which would produce a compensating damage of $1,510.  Consumer Reports says 37 mpg, suggesting that $2,330 would be the appropriate compensation.  You can click here link to download an Excel spreadsheet that lets you play around with the assumptions and produce your own estimate. 

At the end of the day, Ford might not be allowed to unilaterally decide what the fair amount of compensation is.  In June, the Judicial Panel on Multidistrict Litigation consolidated several suits against Ford into one class-action lawsuit in the Southern District of New York on behalf of all Ford hybrid owners.  

But as far as I’m concerned, it’s not clear whether I was harmed by Ford’s representation with regard to my second purchase. Pitkin’s lawsuit back in December stated that he “reasonably believed that the C-MAX Hybrid would actually achieve 47 mpg when driving in the real world.”  But I bought my second C-Max after I already had some idea that I wouldn’t be getting 47 mpg.  So it’s not clear that I relied, to my detriment, on the misrepresented fuel efficiency.  Should I send Ford back the second check?


adam

What good would sending back the check do?

Ford seems to have blatantly lied about the MPG estimates of this car to make it look more appealing compared to other hybrids and has gotten off with little to no penalty. The check is for anyone that purchased one of these vehicles because of their 'mistake'.

If accepting the check would cancel any future payments due to ford misleading customers, then yes, send it back. I wouldn't accept it, that amount is far too small.

Daniel

The real question is, why does the EPA's flawed test get used anyway? I haven't had a car get even close to the EPA rating in quite a while... Well unless I go 55 mph on the highway. Mileage drops off quickly after that because automakers intentionally design transmissions to get peak mileage at 55-60 mph to get good EPA scores KNOWING that it will reduce actual mileage in the real world. If the EPA raised their highway speed limit test to 70 mph, cars would be more fuel efficient at the speeds people actually drive on the highway. Maybe we should get rid of the EPA test altogether and have independent agencies develop repeatable real world tests that give better indications of fuel economy rather than let the government keep issuing numbers based on a flawed testing methodology.

Taylor Marks

Where are you finding speed limits of 55 MPH? Most highways I drive on have speed limits of 65 MPH - normally the only time I see 55 MPH is when there's buildings within 500 feet of the road or so.

Jeremy

Turn it into a real "goodwill payment" and donate it

Chris

No, you should cash the cheque and move on

Dave saunders

5% interest? Where do I sign up?

Taylor

I see both sides of the coin here and understand why you appear to have a certain level of internal conflict over the matter. I am leaning, however, towards you keeping the second check. I wouldn't think of it as relying on false information to your detriment, but rather a sort of "cash back rebate" on the car itself.

You mentioned that you purchased the cars just a few months apart. Now it is unclear whether they were both new or used or one of each (not that that is important), but I doubt that the second car was discounted in any way regarding the drop in estimated fuel efficiency (I could be wrong on that). The price of the car is the present value of all benefits and functionality the car will provide combined. I am assuming the second car you purchased was priced with 47 mpg in mind when a more realistic rate would be 43 mpg (or maybe lower). Whether you realized this asymmetry at the point of sale is irrelevant. Use the money to offset this difference.

If you continue to feel guilty about keeping the second check, invest it back into Ford stock and increase demand for the security by a negligible amount (Might not be negligible if everyone used their check in this manner) and let it sit for > 1 year.

Interesting situation; no real right answer. Best of luck.
Keep em coming Steven and Stephen. <3 Freakonomics.

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Patrick

Use the money to invest in Toyota stock

Sefton

Fuel consumption depends a lot on how you drive.

Mike V

I think there is a gap for all cars between EPA mpg and actual mpg. so to be fair to the competition, if the usual mpg gap is ~5 mpg, fords good will amount shouldn't need to cover that 5mpg difference.

KL

I am not a lawyer. I am not your lawyer. This is not legal advice. In many jurisdictions, you need only show a REASONABLE reliance on a material misrepresentation to state a claim for fraud, misrepresentation, etc. It's reasonable to rely on the representations of a car manufacturer as to their car's MPG even if you have some vague notion from a news story that the representation might not be accurate. A random litigant's civil complaint does not prove any facts about MPG; it's just his allegations. It doesn't make your reliance on a tested, government-approved, manufacturer-touted representation unreasonable. Furthermore, I would imagine the lawsuits also state claims under various consumer protection laws. Those may require no reliance at all.

Bodger

Quite a quandary. Keep the money or send it back? Clearly arguments could be made for both sides so the best course of actions is to choose a third way and send the money to me, small used bills preferred, and then you can sleep at night.

Brett H.

Keep the money without thinking twice.

*Clearly* this fuel economy issue is due to the partial government shutdown and their site isn't being updated: http://www.fueleconomy.gov/

James

I'll offer you a challenge: Loan me one of your C-Maxs for a few weeks, and I bet I'll get over 47 mpg on the highway. (Living where I do, I'll have little chance for city driving.)

The mpg you get from any car depends on how you drive it. Unlike Daniel above, I've never had a car that I didn't get better than the EPA estimate from. For instance, the 1st Gen Honda Insight has an EPA rating of 49/61/53, yet I'm averaging 71.2 mpg in mine (over 120K miles), or 17% above the highway rating.

Steve

Until the Fords came along, two of the Prius models were Consumer Reports winners http://www.consumerreports.org/cro/news/2012/12/tests-show-ford-fusion-c-max-hybrids-don-t-live-up-to-47-mpg-claims/index.htm for the largest discrepancy between CR tested and EPA numbers. Nobody pressed Toyota to give them a refund, and it sure didn't stop me from buying a Prius V. A friend bought a C-Max earlier this year with eyes open. She'll get a refund, even though she bought the C-Max for all the right reasons.

scott

I'm not sure where the 47 mpg number comes from, but the published fuel economy numbers and the numbers on the sticker are based on a very specific drive cycle under very specific conditions. The drive cycle is per an EPA standard, and is run on a chassis dynamometer with a new vehicle.

Changes in drive cycle, vehicle maintenance, and environmental conditions will all affect fuel economy.

Pete

I think your issue is with the 10 years of ownership. KBB.com estimates 71.4 months for an owner to hold a new car; plug that into your spreadsheet and you get $523.62, pretty close to the $550.

Kevin

Of course you shouldn't send it back. I also would not cash it yet, if you have to sign a waiver to do so. Your excess of conscience is focused on the wrong item here. Yes, you had an intimation that the car might not perform as advertised the 2nd time, but you were harmed by the false representation of the MPG, not your guess. The question arises how did their testing and EPA oversight fail in this instance, to determine if it was outright fraud or a simple mistake, and ideally whether Ford or the EPA should be owing you money. Either way, I don't see how the fault lies with you.

Joe

Ford would have used a 13.63% discount rate based on your assumptions.