Honda to stop auto leasing in New York on July 31

NEW YORK, July 1, 2003; Reuters reported that Honda Motor Co.'s U.S. auto financing arm said on Tuesday it would no longer lease cars in New York state as of July 31, citing a law that holds leasing companies liable for car accidents.

The move by the American Honda Finance Corp. follows similar actions taken by other automakers and auto lenders seeking to limit multimillion-dollar payouts after being sued by auto lessors that were in car accidents.

Since leasing companies are listed as owners on the titles of the vehicles they lease, the laws in New York, as well as Rhode Island, allow accident victims to sue them for damages.

"It appears that New York will not change its vicarious liability laws by the end of this month, thereby forcing AHFC to stop writing new leases in that state," Steve Smith, a senior vice president at American Honda Finance Corp., said in a statement.

The laws were designed to hold owners of chauffeur-driven vehicles liable for accidents.

Instead of leases, auto companies and lenders will offer so-called "balloon" loans, which work like leases but transfer ownership of the vehicle to the driver.

Leasing is about twice as popular in New York as it is in the rest of the country, largely because of the tax breaks it gives businesses and the flexibility it gives drivers to have a new vehicle every few years.