By Joe Palumbo
Under new “vicarious leasing” legislation a car-leasing company is held accountable for accident-related damages since it retains ownership of the vehicle. As a result of this law, companies were terminating their New York car-leasing programs.
Within the last year an alternative to leasing known as “smart buying” has been implemented to shift the blame for accident-related damages from the companies to the drivers.
At the time, though, Bruce Bendell, chairman, CEO and president of the Major Automotive Companies Inc. in Long Island City, was concerned that the lack of a leasing program would negatively affect sales. And his worries were not unfounded, with auto financiers such as GMAC, J.P. Morgan Chase & Co. and the Ford Motor Credit Co. pulling in their horns. GMAC was the first to terminate its program May 1, nearly a year ago.
I’m sure that those who have leased vehicles that are coming up for renewal would like to know what has happened during this time. The bad news is the vicarious leasing law is still on the books. The good news is there is an alternative. I spoke with Rosa Cruz of Paragon Honda in Woodside who explained how it works.
What was known as leasing a car is now known as “smart buy.” Rosa said there is not much difference in the paperwork as compared with that of the former car leasing. What is different is the interest rate for the period of the lease. The sales tax to be paid is only for the leased portion amount, Rosa said.
Another difference is that your name goes on the title of the vehicle with the financier listed as the lien holder. That is what the key issue was about from the get go. With you listed as the owner, you — and not the lien holder — can be sued in the event of an unfortunate accident.
So if you are looking to lease this year, that’s the scoop. And what about all the gloom-and-doom talk from the car dealers a year ago? They don’t appear to have been hurt at all. Since that time, New York-area car dealers have sold in excess of $19 billion worth of new cars.
Nearly six out of 10 vehicles sold were cars, with the balance being in the light truck category. This generated nearly $1 billion of revenue in sales tax. And there should be no crying by the nearly 29,000 auto dealer employees who register an average annual income of just under $59,000. So if you want to lease a car, go right ahead and just ask for a smart buy.
So how’s business for auto leasing? It looks like it turned out to be a win-win situation for everybody.
Joe Palumbo is the fund manager of The Palco Group, Inc., an investment company, and can be reached at email@example.com or 718-461-8317.