Auto Dealers, Manufacturers Lobby to Allow N.Y. Consumers to Affordably Lease Vehicles

May 6, 2004

Vicarious liability – the legal concept that holds a leasing company liable for a driver’s negligence – is costing consumers more than $130 million each year and eroding choice from the market place, according to information released in Manhattan by the Alliance of Automobile Manufacturers (Alliance) and the Greater New York
Automobile Dealers Association (GNYADA).

Vicarious liability, which has forced 19 automakers and every major retail bank in New York out of leasing, reportedly diminishes consumer choice and creates a higher cost for car buyers and leasing customers. Automakers that still offer leases are reportedly forced to add additional charges to help offset the potential cost of ‘vicarious liability’ lawsuits. These additional fees are not charged in any other state. The industry believes that the interests of New York’s trial lawyers – who benefit from potentially unlimited payouts from automakers – are being placed over the needs of New York’s consumers.

“Because the State Assembly has failed to protect consumers and pass much-needed reform, New York consumers are losing the ability to affordably lease cars and trucks,” said Kris Kiser, Alliance vice president of State Affairs. “Fifty of the State’s 62 counties saw leasing decline by more than 40 percent, and more than half the counties dropped by at least 50 percent.”

The information released by the Alliance and GNYADA reveals that car
buyers and lessors in New York paid an additional $132,507,391 since
automakers and banks began pulling out of leasing in May 2003. These additional costs are derived from the extra sales taxes paid by consumers who were forced out of leasing and by the higher lease acquisition fees that New York consumers are charged.

Extra sales taxes paid by consumers who were forced out of leasing:
81,565 consumers paid an average of $707.14 each, or a total of
$57,677,874 in additional sales taxes that they would not have paid if they would have been able to lease a vehicle.

Additional acquisition fees paid by New York consumers:
142,656 consumers who leased vehicles paid an average additional
acquisition fee of $524.88 each, or a total of $74,829,517 more to lease a car in New York due to the Vicarious Liability Law. Combined, the total additional cost to consumers is $132,507,391.

“Consumers are effectively paying a ‘Trial Lawyers Tax’ because of this
ridiculous and antiquated law,” said Mark Schienberg, president of the Greater New York Automobile Dealers Association. “It is unfathomable why New York consumers’ choices are limited, and they are losing their right to lease cars. How is that good for consumers, retailers or the economy? Consumer choice is at stake here,” he stated.

“The New York State trial lawyers, who stand to make huge sums of money from unlimited vicarious liability claims, are effectively holding consumers and the auto industry ransom,” continued Schienberg.

Virtually every segment of the industry saw a decrease in the number of vehicles leased. In 2003 new car and light truck leasing in New York decreased by 36 percent while the rest of the country experienced a decline of only 18 percent. Minivans experienced a 52 percent drop, SUV leases declined 44 percent, and entry-level vehicles saw a 53 percent reduction in leases. The most dramatic change appeared in the mid-size pickup category with a reduction of 89 percent in leases.

“New York is the only state in the nation with unlimited vicarious
liability,” said Kiser. “In the 49 other states, courts and legislatures
recognize that leasing companies have limited ability to control the day-to- day actions of their customers; thus, leasing companies should not have liability for damages caused by negligent drivers.”

Last spring, in an effort to avoid this crisis, the New York Senate passed legislation, S.397, which would have changed this law, sponsored by Senator Owen Johnson from Babylon, Long Island. Thus far, the State Assembly has refused to act on similar legislation, A.1042, sponsored by Assemblyman Ron Canestrari. The bill languishes in the Assembly where reportedly the trial lawyers
have successfully blocked consideration of this measure.

“With the release of this information and now knowing the extent of the
financial implications vicarious liability has on consumers, we hope that policymakers in Albany will correct this injustice,” said Schienberg.

Kiser added, “It’s time New York repealed this law and gave New Yorkers what Americans in the 49 other states have: access to competitive, affordable auto leases. We urge consumers to visit and tell their Assembly member to support A.1042.”

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