DEALS ON WHEELS EXPANDING AUTOMOTIVE OPPORTUNITY IN NEW ENGLAND
Download the PDF By Susan Brenna
Shown here atop her new Honda, Robyn Harris could hardly believe her ears when Fannie CLAC counselors told her she could afford a brand new car.
The first time Robyn Harris ducked into the belowground office of Fannie CLAC, a nonprofit car ownership program in Lebanon, New Hampshire, she was in a bad fix. A divorced mother of two teens, she was hiring cabs, begging rides, and walking unlit roadways to get to her night shift at a factory and her day job on the sales floor at J.C. Penney. She was $7,000 in debt, partly from two disastrous used car purchases. The first car, a 12-year-old Chevrolet Beretta, expired days after Harris sank $3,000 into repairs and just six months after she bought the car for $2,000. The second, a 10-year-old Ford Taurus, failed inspection before she could pay off the loan (at 25 percent interest).
Despite her dire financial straits, Fannie CLAC counselors told Harris she was a strong candidate to buy a brand new Honda. She had a steady income—enough to handle a monthly car payment of approximately $240. She would have to clean up her credit first and learn to budget. But Fannie CLAC would teach her how to do that.
Harris could hardly believe her ears.
Once in budget counseling, though, Harris began to see how she could make the leap. “One thing they made me realize was that I was spending $60 a month on Dunkin’ Donuts coffee,” Harris says ruefully. That’s one-fourth of a car payment.
By February 2003, nine months after first visiting Fannie CLAC, Harris walked into a Honda showroom, bought a $15,000 Honda Accord, and signed a loan at 6.6 percent guaranteed by Fannie CLAC (which often secures loans at 4.75 percent). She now drives her sons around in a safe car, and she earns overtime wages somedays without missing her ride. “It has made all the difference,” she says.
Harris’s story is uplifting. But it is also uncommon.
Nearly 10 percent of U.S. families, including one-fourth of families earning $25,000 or less, have no cars. Lacking solid credit, these families typically face exorbitant interest rates when they try to buy a car. Then they are stuck with costly and unpredictable repair bills as their aging vehicles break down.Yet programs to help low-income families obtain affordable used cars are not widespread, and most of those programs offer only temporary relief.
Fannie CLAC is the first and only program in the nation that aims to bypass the used car market entirely by enabling low-income families to buy new vehicles.A TICKET TO JOBS AND SELF-SUFFICIENCY
In spread-out states like Vermont and New Hampshire, in fact throughout most of America, if you want to get and retain a job you need to own a car and keep it running. Eighty-eight percent of American workers drive to their jobs in cars; only 5 percent commute by public transit, while just 4 percent walk or ride a bicycle.
Nationwide, less than 5 percent of roadways are served by public transit. Rural residents are particularly disadvantaged: the Federal Transit Administration estimates that 40 percent of rural counties have no public transit service at all. Many car-less urban dwellers suffer as well, stranded by bus and rail systems that miss vast portions of city and suburb and offer spotty off-hours service. In Seattle, for instance, “Poor people tend to have the worst shifts, which makes them the least likely to have public transportation work for them,” says Susan Crane, executive director of Port Jobs, which backs Seattle’s Working Wheels program. Without rides, Crane notes, many can’t even get to job sites to apply.
Studies throughout the United States show that welfare recipients are more likely to find work and to raise their incomes when they have access to a car.
The Progressive Policy Institute reported in 2002 that “aside from the lack of child care, lack of transportation is perhaps the most common problem facing low-income workers trying to get and keep a job.”THE HIGH COSTS OF AUTO OWNERSHIP
If you don’t have much money in your pocket, though, and especially if you don’t have strong credit,
owning a car is alarmingly expensive.Low-income buyers typically get the worst available terms on car financing. Banks and credit unions calculate rates based on the buyer’s credit history (and few low-income people have blemish-free records), as well as the age and condition of the car. Less-creditworthy purchasers of high-mileage cars can pay double or triple the rates of more-creditworthy borrowers buying new cars.Buyers who don’t qualify for even the steepest bank loans are pushed into the subprime lending market, where finance companies typically charge interest rates of 17 to 25 percent. And the poorest of the poor can’t even qualify for subprime loans. They are left to patronize streetcorner “Buy Here, Pay Here” lots that steer around usury laws and advertise “zero percent interest.” These dealers often sell cars at inflated prices and require 50 percent or more of the price up front— then collect the remainder in weekly installments.
Often, the least-affluent consumers are further drained by driving the least-reliable cars, with the lowest fuel efficiency and the most frequent breakdowns.
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