July 2, 2003
Honda Motor Co.'s U.S. auto financing arm says it will no longer lease cars in New York state as of July 31. It's the latest company to flee New York, citing a law that holds leasing companies liable for car accidents.
Acura, Honda and J.P. Morgan Chase all pulled out of the leasing market in New York July 1 and Ford Motor Credit and its subsidiaries will do the same July 10. GMAC and Bank One Auto left the state in March for the same reason, what's known as the state's "vicarious liability" law.
Since leasing companies are listed as owners on the titles of the vehicles they lease, the laws in New York, as well as Rhode Island, allow accident victims to sue them for damages. The laws were designed to hold owners of chauffeur-driven vehicles liable for accidents.
Auto dealers tried to get the state legislature to repeal the 80-year-old law but failed.
"It's all happening just like we said it would," said Robert Vancavage, president of the New York Automobile Dealers Association. "It's now damn near impossible" to lease a car in New York.
Consumer advocates have opposed repeal of the statute, arguing that a sharp decline in leasing business is the real reason companies want the law thrown out.
Consumer groups and the New York Trial Lawyers Association say that leasing companies are negligent in failing to check out the history of the drivers they lease to. Vancavage, however, maintains the lawsuits "are all about going after deep pockets."
Leasing is about twice as popular in New York as it is in the rest of the country, largely because of the tax breaks it gives businesses and the flexibility it gives drivers to have a new vehicle every few years.
Instead of leases, auto companies and lenders will offer so-called "balloon" loans, which work like leases but transfer ownership of the vehicle to the driver. However, the balloon loans don't provide the same tax benefits as leases.
