AAMA: Consumers to Get More Information About Vehicle Leasing
26 November 1997
AAMA: Consumers to Get More Information About Vehicle Leasing
WASHINGTON, Nov. 26 -- Consumers who lease cars and trucks
will get new information about how leasing works and about the terms of their
individual lease, under a new federal regulation to take effect January 1 of
next year.
The new leasing rule, known as Regulation M, will require that consumers
be given information about their lease before they sign the agreement. The
regulation requires that consumers be given a disclosure form with specific
information about the terms, conditions, and costs of their lease.
To make consumers aware of the new regulation and to better inform
consumers about the leasing experience, representatives of the automobile
industry have been working in partnership with federal officials and consumer
advocates to develop new consumer education materials. The availability of
the consumer education materials will be announced in December.
"This is good news for consumers. The regulation ensures that consumers
will have clear, straightforward, standard information regarding their lease,"
said Andrew H. Card, Jr., President & CEO of the American Automobile
Manufacturers Association.
"Just as important for consumers, they will have access to new educational
materials that will help them understand how leasing works, and their rights
and responsibilities under a lease agreement."
Card praised the efforts of industry, government, and consumer advocacy
groups who worked together to produce the new educational materials. "Our
member companies, Chrysler, Ford, and General Motors, are strongly committed
to educating consumers about leasing. We want consumers to be comfortable
with leasing, because, ultimately, consumer satisfaction is what makes leasing
a positive experience."
Leasing has become an increasingly common method for obtaining a new
vehicle. Of the total market for personal use vehicles in 1996, about 30
percent of new cars and 25 percent of new light trucks were leased, according
to statistics from a leading consumer leasing analyst. However, while leasing
has become a significant part of new vehicle financing, it is still a new
experience for many consumers, Card noted.
"Leasing is a good choice for many consumers. But it is important that
each individual assess his or her personal finances and vehicle needs to
determine if leasing is the appropriate choice," said Card.
In addition, consumers can get information about leasing by visiting the
World Wide Web sites of AAMA member companies at http://www.chryslercorp.com,
http://www.ford.com, and http://www.gm.com.
AAMA is the trade association whose members are Chrysler Corporation
, Ford Motor Company , and General Motors Corporation
. The AAMA Web site can be reached at http://www.aama.com.
LEASING Q&A
How is leasing different from buying?
When you lease, you are paying for the use of a vehicle over an agreed-
upon length of time and number of miles. When the lease expires, you do
not own the vehicle. You must return the vehicle or arrange to purchase
it.
How common is leasing?
In 1996, about 30 percent of new cars and about 25 percent of new light
trucks (pickups, vans, minivans and sport utilities) for personal use were
leased.
How does leasing work?
Once you have selected the vehicle you want, you must decide how long you
want the lease to run (24-36 months is typical) and how much mileage
allowance you want (12,000-15,000 miles per year is typical). You will
make an initial payment which typically will include: a down payment on
the vehicle (known as capitalized cost reduction); the first monthly
payment; a security deposit or last monthly payment; and applicable taxes
and fees.
During the course of the lease, you must make monthly payments. At
the end of the lease, you can return the vehicle and walk away, or you may
arrange to purchase the vehicle.
Who should consider leasing?
Leasing is a good option for many consumers, but not all. Each consumer,
should consider his or her personal finances, driving needs, and vehicle
preferences before deciding to lease or buy. In general, leasing can
offer a lower monthly payment for a vehicle than buying. Or, the consumer
may be able to obtain the use of a more expensive vehicle. Also,
consumers who trade vehicles every two to five years may want to consider
leasing.
What does the new federal regulation do for the consumer?
The revised Regulation M, part of the federal Consumer Leasing Act,
mandates new disclosures that must be made to consumers before a lease
agreement is finalized. The consumer must be given a completed form that
lists specific terms and costs of the lease. The information will include
the amount of initial charges to be paid, a description of the vehicle,
the payment schedule, and the consumer's responsibilities for maintaining
the vehicle and liability for terminating the lease early.
When does this new regulation take effect?
Regulation M takes effect January 1, 1998. The government, working with
the automobile industry and consumer advocates, is preparing new
educational materials that will help consumers understand leasing in
general and the new regulation.
SOURCE American Automobile Manufacturers Association
