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Putting the 'ease' in lease
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September 18, 1996: 7:59 p.m. ET
New federal rules are designed to make car-leasing contracts straightforward
From Correspondent Kelli Arena
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WASHINGTON (CNNfn) - Leasing a car isn't as easy as it looks. A leasing document is usually filled with legal jargon that leaves many consumers confused or worse, spending more money than they should.(935K QuickTime Movie)
Enter the Federal Reserve Board, which -- prompted by complaints from attorneys general around the country -- stepped in Wednesday with new rules regarding car leases.
The new rules, which are designed to aid consumers in a financial relationship they often don't understand, make leasing contracts as straightforward as possible.
"There will be more certainty in the marketplace, and everyone will come out of these transactions with a much better feeling the business basis is sound," said Randy Lively of the American Financial Services Association.
The new rules require dealers to provide a one page document disclosing, plain terms, the price of the car, and the insurance and lease charges included in the monthly payments. Businesses have twelve months to comply with these new requirements.
The new document will also have to explain terms such as depreciation, residual values, and what they will mean for your wallet.
Some consumer groups say the new rules are a start, but don't go far enough. For example, many consumers don't realize they are paying interest charges.
"We're calling for the disclosure of a lease interest rate," said Janice Shields of the U.S. Public Interest Research Group. "If a consumer has to decide between borrowing to buy a car and leasing a car, they need to be able to compare the interest rates."
But the auto industry counters that the many variables in a typical lease make that nearly impossible.
So even with the new rules, when deciding whether to lease or buy, shoppers still need to be smart and do their own research.
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