The shock of oil pushing $150 a barrel has put the value of big cars, trucks and SUVs in freefall. The companies that have leased those vehicles now find themselves facing huge potential losses as those gas hawgs roll off lease. The consumers who have leased the big vehicles find themselves in the enviable position of not incurring the losses that those who purchased identical vehicles will now face.
Companies that sell GAP, protection for a car buyer for any shortfall between the amount owed on the vehicle and the amount the vehicle is worth when it is totaled, are scrambling to figure out how to pay claims when the GAP widens for the big vehicles. I suppose that some of those potential losses might be made up when gas sippers are worth more.
Companies whose products, prices and profits are predicated on assumptions about vehicle mileage or the likelihood of vehicle accidents – providers of service contracts and insurance companies come to mind – are likely to be chuckling all the way to the bank if vehicle use and vehicle speeds continue to be depressed.
The hybrids and the yet-to-be-seen mass production of plug-in electric cars may well bring smiles to the faces of those early adopters who get a thrill when they whirr by gas stations, but those smiles may turn to frowns when those batteries finally give out, leaving them with a battery bill that might equal the value of their cars.
What does all this have to do with legal stuff, you ask?
Well, all of the relationships described involve legal arrangements of some sort, and all of those arrangements anticipate certain payments and certain returns on behalf of those participating in the arrangements. When contracting parties fail to get the benefit of the bargains they have struck, the resulting disappointments can work their way into the courts.
And there’s no telling what the consequences of that will be.
Vol 5, Issue 10