Almost 13 years after a state law took effect aimed at ending disputes over “excess” wear charges on returned leased cars, they’re still a potential minefield for consumers, experts say. And dozens of such disputes make their way each year to an arbitration program run by the state attorney general’s office.

So, consumers should proceed with caution when signing a lease and again when it nears its end, experts recommend. “When you lease a car, the sticker shock comes at the end, not the beginning,” said Jack Gillis, a spokesman for the Consumer Federation of America and author of “The Car Book,” an annual buyer’s guide.

But a lot of the guesswork was taken out of the process by the New York State Automobile Retail Leasing Act - which took effect with leases written after Aug. 11, 1995. The law limits excess wear charges to the actual cost of repair, specifies that consumers can appeal to lenders and set up the attorney general’s arbitration machinery. “Our office receives and acts upon dozens of these requests for arbitration and the vast majority of them end with an agreement between the two parties,” said a spokesman for Attorney General Andrew Cuomo.

The law has been interpreted by Cuomo’s office to apply also to “balloon” loans, which, like a lease, offer low monthly payments. In a balloon note, the consumer, not the lending institution, owns the car and at the end of the term can opt to return it as final payment. As with a returned lease car, it will be resold and, so, is subject to inspection by the lender.

Balloon notes were popular from 2002 until 2005 in New York when some lenders stopped offering leases because of the state’s “vicarious liability law,” which, until Congress took action in 2005, made lenders responsible for damages arising from accidents involving leased cars they owned.

One consumer who went that route was retired building contractor Richard Stone of Dix Hills, who financed a Subaru in 2004 for 48 months. He returned the car in May. He said that in June lender Chase Auto Finance wrote to him, saying that a noise under the hood suggested engine trouble and that there were several dings and scratches. Grand total to make the car right again: $1,725.

“It really got me aggravated,” Stone, 67, said. “It was like someone trying to pick your pocket.”

He telephoned Chase and disputed the need for engine repairs or cosmetic restoration. Ultimately, nearly all of the charges were waived, including a $300 “disposition” fee, he said. He paid only $92.

Chase wouldn’t comment on Stone’s case, but spokeswoman Mary Kay Bean in Detroit said the same criteria apply to leased or balloon loan vehicles.

Elaine Littwer, legislative coordinator of the National Vehicle Leasing Association, said it’s important for consumers to understand that damage reduces the resale value of a vehicle. “The ‘I don’t own it and I don’t care’ attitude ends up costing them money,” she said.

Brian Rauer, currently in charge of the Long Island and Mid-Hudson offices of the Metro New York Better Business Bureau, said consumers should read the contract before signing a lease; inquire about any “turn-in fees;” and be sure they understand mileage limitations.

“It can be a tricky process,” he said.

ENDING A LEASE PAINLESSLY

Take care of the car as if you owned it. Cigarette burns or tears in the upholstery, certain dents, scratches and mechanical flaws can cost you big-time if the lender deems them beyond normal wear and tear.

Read your lease contract - they’re all worded pretty much alike in New York State. Pay attention to the sections on wear and tear, excess mileage and processing fees.

Just before turning the car in, take clear photos of the interior and exterior, including the odometer, for your own records should a dispute arise over mileage driven or whether specific damages are excessive - and also to protect yourself against damages that occur after the car was turned in.

Consider having the car detailed before you return it, to remove scratches and stains inside and out.

You might want to have your own appraisal done to dispute that of the lender, but it has to be by a state licensed appraiser.

To take advantage of the state attorney general’s arbitration program, obtain a form at a regional office, or call 800-771- 7755. Complete it and mail to the New Car Lemon Law Arbitration Unit at 120 Broadway, New York, NY 10271. Long Island regional offices are at 200 Old Country Rd., Suite 460, Mineola, and 300 Motor Pkwy., Hauppauge. The attorney general’s Web site is oag.state.ny.us.

- TOM INCANTALUPO

SOURCES: NATIONAL VEHICLE LEASING ASSOCIATION, BETTER BUSINESS BUREAU, NEW YORK STATE ATTORNEY GENERAL’S OFFICE, CONSUMERS UNION, CHASE AUTOMOTIVE FINANCE.

Consumers Can Still Benefit from Leasing New and Used Cars

CINCINNATI–LeaseCompare.com, the leader in online direct-to-consumer auto leasing, today announced that it has the financial resources to provide leasing for those who want to lease Chrysler and other vehicle makes, including SUVs.

As an independent leasing company, http://www.LeaseCompare.com gives consumers access to new and used car leasing from banks, credit unions and other finance sources. Site visitors can instantly compare payments, rates and residual values from each source and select the best lease for their driving habits.

“LeaseCompare.com offers an alternative to a manufacturer lease.” says Tarry Shebesta, President of LeaseCompare.com and auto leasing expert. “From one location, consumers can shop multiple lease offers from different sources and secure their lease online.”

“Even though Chrysler and other manufacturers are pulling back from leasing, there are still competitive lease options available to consumers if they know where to shop” comments Shebesta. “LeaseCompare.com offers such a marketplace.”

Top reasons consumers prefer to lease:

• Lower monthly payments
• Little or no down payments
• No trade-in worries
• Avoid upside-down loans
• Lower sales tax (in most states)

Shebesta also notes that “Dealers looking for leasing sources to offer their customers can use the programs available on LeaseCompare.com through a dealer-only website http://www.DoALease.com.

Just before it’s that time again to buy that new car again, think about the possibility of leasing one instead. Leasing a car offers many advantages that you might not have considered in the past. Read our list of advantages of car leasing below before you make that huge new car purchase.

A new model every two or three years
Car designs change about as fast as women’s fashion. Every two or three years a majority of car manufactures update and improve design on their vehicles. Interior room improves; gas mileage increases; and parts last longer. Why wait five or six years to take advantage of better design and quality? It also feels good to drive a sharp looking late model car compared to an older, not as stylish car, especially if you’re in sales and you need to impress a client. Wouldn’t you rather buy a house from a real estate broker that drives you around in a new BMW versus an older model, less attractive car?

Less worry about the repair bill
With a leased car, the warranty covers most, if not all problems (excluding normal maintenance such as lube and oil and brake jobs). For instance, if your car’s radiator cracks, it will be covered in the lease. If you buy your car, and the radiator cracks after the warranty has ended, then you’ll be stuck with the bill. If it’s a major item, like an engine mount, etc., the cost savings can be enormous with a leased car. With an older model car, figure on spending a few hundred dollars every few months or so on ongoing maintenance or replacement costs. That doesn’t even include the inconvenience of taking your older car to the mechanic every so often.

A Lexus versus a Chevrolet
With low monthly payments, a car lease can get you into that luxury car you always fantasized about. With a traditional car purchase, a Lexus might be out of your league. However, with a car lease, driving a luxury car becomes a reality with low, affordable down payments. Where you might be paying $800 or so for a car loan for a purchase, you might be only paying $500 or so for the same car, with a small down payment.

Online Forex trading system platforms provide online trading possibilities at convenient, around-the-clock hours.

ALEXANDRIA, Va.–The National Vehicle Leasing Association (NVLA) today announced its synopsis of the current condition of the auto leasing industry.

According to the experts at the National Vehicle Leasing Association, leasing is not dead. In fact, there is an opportunity to capitalize on the gap in the market that exists now that some major banks and the Big Three auto manufacturers have retreated from leasing.

Headlines in every major publication heralded this news, amongst other dismal economic data. The front page of the Wall Street Journal read “Chrysler Retreats on Leases.” Interestingly, the subheadline said “Move Could Dent Sales Further.” This raises an interesting point, one that the manufacturers are hoping won’t play out the way the NVLA believes it will. This stems from the simple fact that not everyone will want to sign up for a 72-month purchase finance in order to make their monthly payments affordable.

Where does that leave the independent vehicle lessor? Where do opportunities lie? And where are the pitfalls lurking? Residual values and underwriting are the vehicle leasing industry’s Achilles’ heel. Leasing is absolutely not dead. And, now more than ever, there is a growing need for the independent vehicle lessor. Here’s why:

• Foreign captives, banks and credit unions are ready to take up the slack.
• Independent leasing companies can provide financing options to dealers, especially domestic dealers who now really need a viable option for their customers.
• Trade cycles now, more than ever, need to be shortened for dealers to survive, and leasing is the only proven mechanism to achieve this.
• Leasing is inherently good for the consumer, affording them more options and less financial risk than ownership, especially when compared to a long-term finance agreement.
• Who really wants to keep a car for six years? A three-year commitment with an option to purchase is more desirable for most car purchasers.
• Pre-owned leasing, a staple of most independent leasing companies, is set to hit the big leagues, offering lessors better protection with lower residuals and lessees with the lower monthly payments they need.

Without independent vehicle lessors to fill this gap, how will domestic car dealers be affected by the recent moves in the marketplace?

• A lack of leasing options will send some customers to imports.
• Dealers will be forced to extend terms and trade cycles to reach saleable payments.
• Floor plan costs will rise.
• Increased trade cycles will further erode new car sales.

Without independent vehicle lessors, how will consumers be affected?

• Consumers that inevitably want to trade out after the lease will have negative equity.
• Fewer financing options equal less competition and higher costs to the consumer.

With the announced exit of a few major players from the leasing business in the past month, including captives as well as larger bank players such as Wells Fargo and Chase, funding will once again be at the forefront of our business challenges. Tight credit markets will not serve this industry well. However, discipline and sound business practices will allow those employing them to succeed, even in difficult times.

The NVLA has a host of dedicated funders that seek to do business with NVLA members, as these funders know that NVLA membership signifies a commitment to this industry, and to business excellence as a whole.

NEW YORK -(Dow Jones)- The financing arms of U.S. auto makers are likely to shift to longer-term car loans as they eliminate or scale back their participation in the leasing business.

A longer maturity on loans translates into a slower repayment of principal, increasing the potential magnitude of losses resulting from defaults. It also means that these companies should set aside more reserves to account for possible losses from these loans - on top of the funds they have squirreled away to support the souring credit quality of their portfolios.

But these longer-term loans - which can now stretch out as long as 84 months, or 7 years - are one way that General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC can seek to clear bloated inventories and avoid further market- share losses. With fuel prices above $4 a gallon and consumer confidence on the decline, Detroit’s auto makers have been stung by steep declines in sales of the pickup trucks and sport-utility vehicles that have long sustained their businesses.

As the financing arms of these auto makers eliminate or cut back on unprofitable lease agreements - a trend that has picked up momentum in recent days - longer-term loans for car buyers can bring down monthly payments for borrowers to the same level as payments made under leasing agreements.

“What you’ll probably see is that captive financing arms focus a bit more on longer-term loans, such as 72-month loans to help reduce monthly payments,” says Chris Wolfe, an analyst at Fitch Ratings.

Wolfe warned, however, that longer-term loans increase the ultimate loss severity in the event of default, noting that the amount of unpaid principal is larger than it would have been on a shorter-term loan.

“From our perspective, longer loans mean loss-incurred-in-case-of-default becomes higher,” says Wolfe. “Are companies factoring that into the price they charge the customer? Are they factoring that into the loss reserves?”

Chrysler To Extend Loan Terms

Fitch on Tuesday downgraded its issuer default rating on Chrysler to CCC, just two notches above a default rating. The move followed Chrysler’s announcement Friday that it would no longer offer leases through its Chrysler Financial lending arm.

Fitch said that the downgrade reflected Chrysler’s restricted access to economic retail financing for its vehicles, which is expected to further cut into sales volume. It added that “the lack of competitive financing is expected to result in more costly subvention payments and other forms of sales incentives.”

Chrysler Financial, which typically extends 36-month loans to car buyers, will do more 60-month loans, according to Bill Porter, a spokesman.

The question of longer-term loans comes “into play when we had to make the decision to move away from leasing. It’s shifting the risk,” says Porter.

“You still have the risk of consumer finance; people can still default on their loans. What added to the lease was the risk of declining residual values,” he said. “We believe we can effectively manage our risk through disciplined credit policies on the loan side.”

Leasing comprises an estimated 20% of U.S. auto sales, and has been a key tool used by auto makers to offer lower monthly payments on vehicles customers couldn’t otherwise afford. In recent months, however, leases have become a liability amid tanking resale values, especially of used pickup trucks and SUVs.

In most cases, when a lease is up, the customer returns the vehicle to the auto finance arm, which then resells the car or truck. The lower worth of the vehicle has spelled losses at these companies at the time of resale, and, a fall in the value of their existing portfolio of lease agreements.

Longer Loans Are Key Incentive

Ford announced last week that it wrote down $2.1 billion to cover unprofitable auto leases at its Ford Motor Credit arm in the second quarter. GM affiliate GMAC LLC could announce big lease-related losses when it releases its second- quarter financial report on Thursday.

This week, Ford informed its dealers that it will raise the prices on leases on its most-profitable trucks and SUVs due to the “extreme losses” Ford Motor Credit is taking on these vehicles. GMAC, in which Cerberus Capital Management has a 51% stake and GM has the remainder, said it will no longer extend auto lease deals to consumers with the lowest credit ratings.

“This isn’t the first time auto makers have taken losses on residual values,” said Robert Schulz, an analyst at Standard & Poor’s. “What makes it a little unique now is that they are stopping and ending leasing completely,” he added, referring to Chrysler.

Schulz said that S&P is worried about the potential for the auto makers to implement more broad-based and aggressive incentives.

Cut-rate financing for longer terms has become a key incentive in the arsenal of auto makers.

“Longer-term contracts may be one way to essentially keep” payments on a car loan in line with lease payments, says Curt Beaudouin at Moody’s Investors Service.

“That’s the rock and the hard place that the manufacturer and finance companies are in between at the moment,” says Beaudouin. “The risk is if you loosen standards now to drive sales in the absence of leasing, you’re inviting more credit losses.”

-By Aparajita Saha-Bubna, Dow Jones Newswires; 201-938-2137; aparajita.saha- bubna@dowjones.com

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