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Sticker Shock

Tips and trends for your growing business

Many business owners find the benefits of leasing vehicles muddied by complicated lease contracts. New regulations that become effective October 1, 1997 (but may be voluntarily adopted sooner), should simplify and clarify automobile leases and other consumer lease transactions.

The new rules, issued by the Federal Reserve Board last fall, require leasing companies to adopt a revised disclosure format, which includes segregating certain disclosures that were previously dispersed throughout the contract. To make comparisons easier, contracts must also disclose the total amount of payments.

The new rules also require leasing companies to:

  • make the disclosure of costs paid at lease signing easier for consumers to understand;

  • include a mathematical progression that shows how the monthly lease payment is calculated and the relationship of terms such as "gross capitalized cost" and "residual value";

  • include strong warnings about possible charges for terminating a lease early and for excess wear and tear; and

  • include a disclosure with any percentage rate indicating the limitations of the rate information.

In addition, advertising rules will be changed to deter misleading ads.

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This article was originally published in the February 1997 print edition of Entrepreneur with the headline: Sticker Shock.

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