Preserving individual financial assets through vehicles

Community and Economic Development – Blog by UNC School of Government

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Preserving individual financial assets through vehicles

By CED Guest Author

Published January 13, 2010

Lisa Stifler is a Research Associate with the Community & Economic Development Program.

In rural areas, particularly those within commuting distance to cities, the cost of transportation is high, and often more expensive than in urban areas.  Reasons for the high costs include the lack of or inadequate public transportation and high fuel costs, but they also include the fact that low-income rural vehicle owners often own unreliable, older, “gas-guzzling” vehicles and the fact that vehicle loans often cost more for low-income rural residents.

Access to reliable, affordable, and energy efficient vehicles and low-cost vehicle loans can free up financial assets for low-income rural residents.  Further, having a reliable vehicle also improves access to jobs, health care, education, and healthier food options.  Two programs, one in New Hampshire and one in Wisconsin, are specifically aimed at getting low-income rural residents the best deal possible for reliable and energy efficient vehicles, while teaching the car buyers the financial knowledge and skills they need to buy and maintain the vehicles.

Bonnie CLAC, in New Hampshire, is a nonprofit organization that assists low-income individuals and families in purchasing reliable, affordable new and used vehicles through financial education and providing access to low-cost vehicle loans.  In particular, Bonnie CLAC works with its clients on a one-on-one basis, exploring the individual’s credit and job history, developing steps to repairing credit, educating and empowering the individual with skills necessary to regaining financial stability, assisting in researching and selecting the proper vehicle, providing access to low-interest loans, and providing ongoing support through the life of the loan and vehicle.  Bonnie CLAC  partners with community organizations and employers to help meet the needs of their clients and employees.  It also partners with area financial institutions to help get clients low-cost loans, and it works with area car dealerships to find new cars at significant discounts and reliable, used vehicles at reasonable prices, and discounted warranties.

West CAP, in Wisconsin, is a community action agency in West Central Wisconsin.  In addition to providing housing, job skills, and literacy services, West CAP runs the Jump Start Program and is the sponsoring agency for Ideal Auto.  West CAP established the Jump Start Program to assist low-income, working, rural residents gain access to reliable, affordable recently used vehicles.  The three components of the program are 1) client relationships, including outreach, assessment, and support; 2) partnerships with local financial institutions; and 3) an in-house, licensed auto dealership.  The “client relationships” component of the program includes constant support throughout the program, financial management and education, assistance in repairing credit, linking to other support services, job development support, and education on vehicle maintenance.  The financing component of the program includes a $1,500 down payment (originally $3,000) on a car provided by West CAP, which is then paid back on a monthly basis, and the program works with area banks and credit unions to secure low-interest loans for the clients, with an average of $160 monthly payment.  In addition, the program requires the client to pay $20 per month for a vehicle repair fund account to be used only for minor repairs.  Ideal Auto sells used cars only, which are typically 3-4 years old with fewer than 40,000 miles, and also sells a deeply discounted 6-year 100,000 mile extended warranty that protects again major repairs.

A 2007 study done of Bonnie CLAC showed that, among other things, the program has helped participants find a job, get to their jobs on time, spend less on car repairs, manage household finances better and pay bills on time, get to health care appointments, improve access to local stores for runningn errands, and improve their credit scores.  A 2002 study of the Jump Start Program indicates that because participating in the program, clients reported improved credit scores, improved overall financial health, increased involvement in the community, ability to get and moving on to better jobs, higher wages, and improved quality of life.