DES MOINES-- Attorney General Tom Miller announced today that Mazda Motor of America, Inc., has agreed to settle a false-advertising lawsuit by changing its auto leasing advertisements and paying over $857,000 to twenty states, including $42,500 to Iowa.
"We alleged that Mazda's so-called zero-down or penny-down ads were misleading," Miller said. "Their TV ads buried crucial information in fine print that raced by too fast for anyone to read."
Iowa's suit, filed October 28, alleged that even though Mazda TV ads touted "zero- down" terms, consumers actually had to pay about $900 in up-front fees, including a $450 "acquisition fee," a security deposit, and the first month's payment.
"We said simply that Mazda's advertised deal just didn't exist," Miller said. "Consumers could not walk into a dealership, pay a penny and drive out with a car. We argued that it was misleading to entice consumers to a dealership by falsely making it appear that they have a very small initial payment obligation."
The Mazda ads aired for several months earlier this year on TV and cable programs.
According to the agreement, which was approved and entered today by Polk County District Court Judge Linda Reade, Mazda is prevented from misrepresenting the amount of up- front lease costs and must disclose required lease terms in a clear and conspicuous manner -- including the total amount of up-front cost and the number, amount, and timing of scheduled payments. Similar settlements were entered by other states in their state courts.
"We have been working with a group of states to insist on auto lease advertising that is fair to consumers," Miller said. Last month, GM, Honda, Isuzu, and Mitsubishi agreed to modify their advertising and make payments to the states totaling $1 million. Iowa's share from the four companies was $50,000. Mazda alone will pay Iowa $42,500. Of that amount, $80 will be used to pay court costs, and the remainder will be used for consumer protection education and litigation.
"In Mazda's case, we felt we had to proceed to litigation," Miller said. The other companies reached a settlement with the states prior to the states filing lawsuits.
Leasing tips for consumers
Miller noted that more and more new-car consumers are resorting to leasing autos -- about one-third in 1995 compared to one-fifth in 1989.
"But consumers need to know what they are getting into," Miller said. He listed several tips for consumers considering an auto lease agreement: