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.
August 14th, 2008
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.
August 12th, 2008
You know the economy is bad when a house given away for free by ABC’s “Extreme Makeover: Home Edition” is headed for foreclosure. But even though we hear a lot about the mortgage mess, there’s also big trouble afoot in the auto-loan industry.
Turns out, the big three automakers in Detroit want out of the once-lucrative car-leasing business. Last Friday, Chrysler announced it would no longer offer leases for its vehicles. The move represented a sea-change in how the automaker approaches financing.
On Tuesday, both Ford and General Motors leaked word that they, too, were backing away from leasing. Ford suggested that it might stop leasing only trucks and SUVs; GM says cryptically that it is going to make “adjustments” to its leasing regime.
Since the early 1990s, leases have been a common arrangement allowing consumers to take possession, albeit temporarily, of cars they typically couldn’t afford to buy outright. Automakers were thrilled by the lease because it (1) allowed them to expand the pool of potential buyers to include people who couldn’t afford traditional loans; (2) created constant demand for new cars, since leases normally expired after two to three years; and (3) was tremendously profitable: After charging someone rent on the car for a couple of years, the automakers would take the car back and sell it on the secondary market for a hefty profit.
To get a sense of how important leases are, until this week, they accounted for 20 percent of new-car sales for the big three automakers. For now, buyers will still be able to make lease arrangements through third-party creditors, but many of those lenders, including Chase and Wells Fargo, seem to be turning away from leases, too.
What’s going on? A few things, all at once.
First, there are gas prices. Always remember that economic events ripple outward — and $4 a gallon for gas creates a lot of ripples.
One ripple: Over the last year, the price of used full-size SUVs is down 27 percent; the price of used pickup trucks is down 25 percent, according to a recent report in the Wall Street Journal.
Remember that the profitability of the lease depends on the automaker’s ability to resell the used car. So those big price declines on the used market have meant huge losses for the automakers.
Pull back a little, though, and the entire financing side of the auto industry is shaky. Just as in the mortgage world, qualifications for auto loans relaxed earlier in the decade. About $575 billion in new- and used-car loans are made every year and as the downturn set in, the delinquencies began to pile up. Toward the end of 2007 they were at the highest levels since 1992, and it looked as if the auto-finance world might be facing its own crisis.
The bad news is that U.S. automakers may be in a no-win situation. Keep leasing SUVs and trucks, and they’ll keep losing money on the re-sales. But if they cut out leases, a large chunk of customers will no longer be able to afford a new car. And right now they need every buyer they can get their hands on.
Chrysler’s domestic sales are already down 22 percent this year. Eliminating leases that now account for 20 percent of new sales can only hurt demand, creating a vicious cycle.
The good news is that the market for auto loans seems to have stabilized, at least for the moment. The first-quarter delinquencies from 2008 showed improvement over the last quarter of 2007, declining by 18 percent. But even this was a mixed bag: Delinquencies from dealer financing fell, but delinquencies from direct financing — that is, banks and other lenders — rose slightly.
And the further good news is that unlike the housing market, irresponsible lending and borrowing in the auto market shouldn’t directly affect more responsible consumers. Of course it’s the indirect effects that’ll kill you. Let’s see where these ripples go.
Note to readers:
Ellis Henican’s column will return.
Last is a columnist for the Philadelphia Inquirer. Send him e-mail at jlast@phillynews.com.
August 5th, 2008
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.
August 4th, 2008
Automobile Consumer Services, Inc. (ACS), the leader in online direct-to-consumer auto leasing, released a list of the top 10 most requested vehicles from its popular auto leasing
website http://www.LeaseCompare.com . Information was collected during the first
half of 2008 from more than three million lease quote requests.
“We have seen a huge increase in requests for hybrid models with the
Toyota Prius up over 500% from the last half of 2007,” says Tarry Shebesta,
President of ACS and a certified lease consultant. “And, for the first
time, used hybrid demand is increasing because of the waiting list for many
of the new models.”
The Top 10 Most Requested Models
New Car Rankings
1st Half 2nd Half
2008 2007 Make & Model
1 10 Mini Cooper
2 4 Honda Accord (h)
3 1 Chevrolet Corvette
4 4 Toyota Camry (h)
5 6 Honda Civic (h)
6 nl* BMW M3
7 7 BMW 328
8 nl* Toyota Prius Hybrid
9 10 Nissan Altima (h)
10 nl* Honda CR-V
Used Car Rankings
1st Half 2nd Half
2008 2007 Make & Model
1 1 Chevrolet Corvette
2 2 Porsche 911
3 7 Infiniti G35
4 5 Honda Civic (h)
5 4 Audi A4
6 nl* Mini Cooper
7 9 Honda Accord (h)
8 3 BMW M3
9 nl* BMW 328
10 nl* Nissan Altima (h)
nl* = not previously listed
(h) = hybrid available for this model
A complete list of how every vehicle ranks can be found at
http://www.LeaseCompare.com .
“High fuel prices are helping to drive demand in hybrid vehicles,”
comments Shebesta. “Additionally, smart people realize that leasing, not
buying, hybrids make sense, especially right now. With the improvements in
technology coming out every year, they know that they can turn in the
hybrid at lease-end, and not have to worry about selling a car with
out-dated technology.”
Shebesta also notes that, “Leasing protects consumers from fluctuating
fuel prices as witnessed by the current drop in values of the pre-owned SUV
market. Those who leased are simply walking away at the end of their term
and leasing a more fuel efficient vehicle.”
A comparison of all hybrid models and lease payments are available
here: http://www.leasecompare.com/hybrid_car_lease_quotes.php
July 24th, 2008
