Federal regulators are out to change that by drafting rules that could become the most important aid to car shoppers since Congress made automakers post price stickers on the windows of new vehicles.

The rules being prepared by the Federal Reserve Board are expected to require, for example, that consumers be told the price of the car they want to leasea critical piece of information that is not demanded by present law and is missing from many lease contracts.

But industry lobbyists are fighting suggestions that they be required to tell consumers how much interest is included in their lease payments, how much the car will be worth at the end of the lease and how much it will cost to get out of the lease early.

Advertisement

It is important that consumers not be overloaded with information, the American Financial Services Association argued in a recent letter to the Federal Reserve.

Accelerating like an Indianapolis 500 racer, leasing has grown from 12 percent of the cars acquired for personal use a decade ago to what is expected to be more than 36 percent this year.

Still in the embryonic stage, the Fed’s proposal will follow the pattern of the truth-in-lending law and detail the information that has to be disclosed to consumers in car leases.

Regulators are looking at leasing because its rapid growth has produced a matching run-up in complaints to state and federal consumer watchdogs.

We see a lot of problems with people going in to buy a car and being encouraged to lease a car and not knowing the difference, said Grace Weinstein, a member of the Fed’s consumer advisory council, which is helping draft the regulations.

Advisory council members told Fed officials recently that car buyers often are steered into leasing when they discover the monthly payments to buy the car they want are too high for them.

Leasing almost always means lower monthly payments, because the consumer is paying for temporary use of the car, not the full cost of buying it. But for that reason, it also means making car payments forever and never owning a car.

Advertisement*

The monthly payments may be lower with a lease, but in the long run, it is always going to cost you more to lease a car than to buy a car, said Jack Gillis, public affairs director of the Consumer Federation of America.

The first decision a consumer needs to be able to make is whether to buy or lease, said Gillis. To make that task easier, the Center for Auto Safety has put out what it calls a reality check list showing consumers how to calculate leasing costs.

Comparing the long-term costs of leasing with those of buying can be so complicated, however, that some officials are dubious about whether the government can give consumers the data needed without drowning them in numbers.

I think it’s a somewhat futile exercise to try to come up with a way to compare a lease with a financing transaction. They are completely different, warned Cleveland banker David Fynn, another member of the Fed’s consumer council.

At the very least the Fed hopes to come up with rules that will enable consumers to compare one lease with another, a task that is difficult today because dealers don’t have to disclose crucial details.

The voluntary disclosure rule adopted by the Association of Consumer Vehicle Lessors calls for telling consumers the cost of the car, including any special fees, the amount that must be paid up front and the total costs covered by the lease.

Douglas Blanke, an assistant state attorney general in Minnesota, said his office has received complaints from consumers who negotiated a price to buy a car, then decided to lease and later found that the lease was based on a much higher price for the vehicle. Another common complaint is that trade-ins that are supposed to be credited toward the lease somehow get lost in the shuffle, he added.

The most controversial issue facing the Fed is whether dealers should be required to tell consumers the interest rate used to calculate their lease payments. When calculating a car lease, the dealer starts with the price of the new vehicle, then estimates how much the car will be worth at the end of the lease. For a three-year lease on a $20,000 car that is expected to be worth $12,000 at the end of the period, the payments will have to cover the $8,000 depreciation, plus three years’ interest on that amount.

Consumer advocates say the interest rate ought to be disclosed, because it is a crucial number in calculating the monthly payments. But leasing experts have warned the Fed that it is easy to come up with a low interest rate that is not necessarily a good deal.