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Minister of Finance announces consultation to permit banks to lease cars
Practical Law Legal Update 5-386-0669 (Approx. 2 pages)
Minister of Finance announces consultation to permit banks to lease cars
by Stephen Redican and Rosalind Morrow, Borden Ladner Gervais LLP
| Published on 07 May 2009 • Canada |
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Banks have been unable to offer financial car leasing to consumers for the last 30 years. As other sources of lease financing have become severely restricted, the federal government is contemplating allowing banks to lease cars to consumers and has released a consultation paper seeking the views of stakeholders on this.
The Minister of Finance, Jim Flaherty, released a consultation paper on 26 April 2009 seeking views on the potential merits of allowing banks and other federally regulated financial institutions to offer financial leasing for vehicles as well as other household property. Comments on the consultation paper will be accepted until 8 May 2009.
Banks have always been able to offer purchase financing for cars. However, for policy reasons, banks have been unable to offer financial car leasing to consumers for the last 30 years. Given the current environment, the federal government is contemplating allowing banks to lease cars to consumers as other sources of lease financing have become severely restricted, further impairing the automobile industry in Canada.
In reviewing this possibility, the federal government seeks comments on the following questions:
- How do you view the role and prospects of lease financing of vehicles in the coming years?
- Are the existing restrictions on regulated financial institutions with regard to lease financing appropriate in the future financing environment? If not, how should these restrictions be amended to support broad access to financing in a stable framework?
- If federally regulated financial institutions were allowed to provide lease financing, would you expect these entities to participate in leasing? Do you believe such participation would result in a significant increase in the availability of lease financing?
- Does financial leasing of vehicles and personal household property pose risks to financial institutions? If so, how can those risks be managed?
The prevailing view is that in the current economic climate, if the government permits banks to offer financial car leasing, this will likely benefit consumers, dealers, manufacturers and banks. Accordingly, we expect comments from most interested parties to favour relaxing the current restrictions.