Federal Highway Bill Bans Vicarious Liability of Car Leasing Firms

August 1, 2005

When President George Bush signs the federal highway bill, New Yorkers will likely get a special bonus – the return of vehicle leasing, according to the car leasing industry.

The federal bill includes a ban on vicarious liability – the law that holds a leasing company liable for a driver’s negligence which has forced 20 automakers and every major retail bank in New York out of leasing.

The elimination of vicarious liability has long been an initiative of the Greater New York Automobile Dealers Association (GNYADA), and is expected to bring automakers back into the business of leasing vehicles in New York.

GNYADA president, Mark Schienberg, welcomed the federal action. “I am pleased with this bill, which results in repealing lessor vicarious liability in New York,” said Schienberg. “The anticipated signing of this bill means that all New Yorkers will be able to again lease vehicles. This antiquated law has hurt the retail auto industry, and we are pleased that Congress has put an end to it.”

Vicarious liability is a legal concept that holds a leasing company liable for the actions of the driver of a leased vehicle. According to information released by GNYADA and the Alliance of Automobile Manufacturers earlier this year, it has cost consumers in New York more than $280 million in extra costs since 2003.

The passage of this bill ends a long-running battle with the trial lawyers who supported vicarious liability and brings New York in line with the other states that have eliminated it.

Rhode Island legislators only recently renewed a sunset clause of the state’s vicarious liability legislation until June 1, 2006. Chrysler Financial, Chase Auto Finance, Subaru Motors Finance and Ford Motor Credit had all said they would cease leasing in theOcean State if the sunset provision was not renewed.

Vicarious liability has forced 20 manufacturers, including all of the GM, Ford, and Chrysler brands and every major retail bank and credit union in New York out of leasing, according to the industry. The repeal is expected to bring the automakers and banks back into the New York leasing market.

“Historically, automobile leasing programs have allowed thousands of New Yorkers to drive new vehicles at more affordable monthly payments. Leasing is an important alternative financing option for families looking for newer, safer vehicles and for small and large businesses looking to expand their fleets. It is an option that all consumers deserve, and we are pleased that New Yorkers will again have the ability to lease vehicles,” Schienberg concluded.

GNYADA represents 650 franchised automobile dealerships in the metro area of New York.

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