Carmakers Hope Auto Sales Financed by Balloon Loans Will Offset Decline in Leasing

Summary

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Back in April 2003, General Motors became the first carmaker to put the brakes on its traditional automobile leases in New York State. The world's largest auto company said the move was in response to the state Legislature's failure to revoke what it considers an outdated law that holds leasing companies liable in auto accidents.

The unlimited vicarious liability law was adopted in 1924 to hold the owners of horse-drawn carriages liable for the injuries or damages arising from accidents involving their livery drivers.

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Carmakers Hope Auto Sales Financed by Balloon Loans Will Offset Decline in Leasing

Every other state in the union has since eliminated or limited finance-company liability. Measures to revoke the law in New York passed in the Senate but have stalled in the Assembly.

GM, which spent $50 million in 2002 to...

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