Leasing OK in New York Again

Vicarious Liability Laws Reversed


  • Mercedes-Benz E Class

    Mercedes-Benz E Class

    Mercedes-Benz, will now significantly reduce its acquisition fees, cutting costs to the consumer. Other lessors, including American Honda Finance Corp., will be lowering their rates in New York. | March 18, 2010

Article Written in 2005

Leasing has returned to New York State.

Consumers and auto manufacturers in New York are celebrating the president's signing of the federal transportation bill in August 2005, which, among other things, eliminates the state's unlimited "vicarious liability" laws and once again allows leasing.

Vicarious liability laws were originally drafted to protect the interests of luxury vehicle chauffeurs. However, these laws became perverted as a means of tapping into the pockets of large financial institutions as the de facto owners of leased vehicles. New York was the last state in the country with such a law on its books that potentially held owners of vehicles — banks, auto companies' financial arms, or other creditors — responsible for accidents caused by the driver.

While vicarious liability laws were still on the books in a limited form in other states, New York was the only place that continued to allow unlimited vicarious liability lawsuits. Often, these laws were exploited as an unlimited reservoir of income by lawyers and their clients.

Vicarious liability in the Empire State, or New York Traffic Law 388, dates back to 1924, where it was put into effect as a means of preventing owners of horse-drawn coaches and early automobiles from skirting responsibility for damage and injuries that they had badgered their chauffeurs into causing.

Law 388, as originally written, stated, "Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner."

As the days of rich motorists barking instructions from the backseats of their coaches waned, the vicarious liability law seemed to have slipped into antiquity except in New York.

Due to the clever research of two trial lawyers, though, the law experienced an unexpected rejuvenation in the year 2000, when a manual was published on how to use vicarious liability as a means of holding lessors — meaning banks, credit unions, and car companies' financial institutions — responsible for accidents caused by the drivers of leased vehicles.

As a veritable goldmine for lawyers and a legal disaster for lessors and lessees alike, the resumption of this archaic law caused the end of leasing in New York. General Motors Acceptance Corporation had not leased vehicles in New York since April of 2003, and DaimlerChrysler Services has been absent from the state since May of 2004.

By some estimates, leasing had fallen in New York by as much as 75 percent, while the various costs and taxes used to continue leasing by only a select few auto companies could add roughly $600 to $700 to the cost of leasing a vehicle.

As of the president's endorsement of the transportation bill on August 10, though, all companies that comprised the Alliance of Automobile Manufacturers (AAM) announced that they would be returning to leasing in New York. The provision within the transportation bill states that the application of vicarious liability will be waived from "an owner of a motor vehicle that rents or leases the vehicle to a person or affiliate of the owner."

The AAM members — which include Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Hyundai, Jeep, Lincoln, Mazda, Mercury, Pontiac, Porsche, Saab, Saturn, and Subaru, as well as Chase Auto, Wells Fargo & Corp., and the Philadelphia Insurance Companies —, have already returned to leasing in New York or are planning on doing so within the near future.

Mercedes-Benz, which had continued to lease vehicles with exorbitant acquisition fees, has now reduced the cost of its leases. American Honda Finance Corp., which left the New York leasing market on July 31, 2003, and returned in a limited manner on March 24, 2004, with much higher fees, has announced that it will reduce its lease-acquisition fee in the state to its nationwide standard of $595 per vehicle.

For those customers in New York State who plan on getting back into the leasing game, Edmunds.com recommends leases with no money down and a three-year term which allows the car to be driven at least 12,000 miles annually. Edmunds.com also offers a 10-step instructional for leasing.

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