Car Purchase Programs

The Basic Idea:

• Help low-income rural families purchase new or late-model, fuel-efficient, reliable cars.

How it works:

• A nonprofit organization creates a car dealership to sell cars to low-income families – or partners with another nonprofit that already has a dealership to obtain cars.
• The dealership buys late-model, fuel-efficient, reliable cars at auction or buys brand new cars through negotiated arrangements with commercial dealers.
• The cars are resold to low-income families with little or no mark-up.
• The programs offers low-cost financing to the low-income buyer by providing loan guarantees to a partnering bank that makes the loan—typically by agreeing to assume the loan if it goes into default.
• Sometimes a family’s down-payment can be subsidized with use of TANF (welfare) funds.
• The nonprofit screens potential low-income buyers to find customers who will qualify for financing.
• Financial education training is required before a family can receive financing.
• The car financing produces revenue that helps sustain the program.
• Who Does It
• A nonprofit organization created solely for this purpose
• Program arms of an existing nonprofit or agency focused on helping low-income families – for example, a community action agency.
• In some states, the car dealership may need to be set up as a for-profit organization in order to be licensed and gain access to auto auctions.

Pros

• New and late model cars are more reliable, helping low-income families stabilize employment—and other acts of life.
• Lower fuel and maintenance costs for these cars save money that can cover car payments and insurance.
• Loan guarantees bring interest rates down, keeping monthly car payments very low.
• The reliability of these cars—and any remaining warranty—decreases the likelihood of unpredictable major repair expenses.
• The quality of the car can boost a family’s confidence—and improve first impressions of them as job seekers.
• This offers a longer term solution for a family—eliminating the “car worry” for several years as they tackle other challenges.

Cons

• Even with loan guarantees, this won’t work for families with poor credit histories.
• For getting low-income people into cars, this is the most complex option to implement, requiring significant time and resources.
• Recent demand for fuel efficient and affordable vehicles has built demand for the cars that suit this program—making it harder to buy enough at auctions.
• Running the financial education portion of the program usually requires other sources of funding.
• Requires some staff with specialized knowledge!

Simplicity Index

• Tough Nut to Crack. This is the most difficult program to mount to put low-income people in cars, but it is has the highest return. Owning a reliable, affordable car over the long-term helps low-income rural families pursue many RuFES goals.

Quilt It

• Keep It: These programs are always combined with financial education programs, and prospective customers often participate in credit repair programs in order to qualify.
• Grow It: Some Individual Development Account (IDA) programs can help families save for auto purchases.

Examples and Resources

JumpStart and Ideal Auto (Glenwood City, WI). The JumpStart program of West CAP – the West Central Wisconsin Community Action Agency – has helped hundreds of low-income families buy fuel-efficient, late-model cars – all cars originally purchased at auction through Ideal Auto, its for-profit subsidiary.

More Than Wheels (formerly Bonnie CLAC – Lebanon, NH). This ambitious program has helped more than 800 low-income families purchase brand new reliable, fuel-efficient cars (e.g., a Honda Civic), often for less than a used car would cost.

Opportunity Cars (formerly Low Income Car Ownership Clearinghouse) is the preeminent source for updated information on more than 150 rural and urban car donation and ownership programs nationwide. You can find individual programs on the site by zip code, and access up-to-date information, research and resources to help you.

Affordable Car Ownership Programs: Transporting Families Toward Financial Stability and Success (Annie E. Casey Foundation, 2006). This RuFES Practice Brief profiles JumpStart, Bonnie CLAC (now More Than Wheels), and a range of rural auto programs.

Pursuit of the Dream: Cars & Jobs in America (Annie E. Casey Foundation, 2008). This documentary explains the importance of reliable and affordable transportation of low-income families, and provides recommendations for how to overcome the problems families face when purchasing a car. This DVD, as well as an accompanying printed discussion guide are available for free on the AECF website.