When Transit Is Not an Option

  • 2
  • March 06, 2014

Auto Loan Image

Through affordable auto loans, Ways to Work helps ease the financial burden of owning cars for low-income suburban workers.

By Sarah Jackson

The suburbs are in many ways defined by cars. Part of the popular stereotype of an American suburb is homes with two-car garages built on quiet cul-de-sacs, removed from retail and businesses, with scarce sidewalks.

While suburbs are certainly more diverse than that picture, in practice suburban residents often have to get into their cars to pick up groceries or get to work. Where suburban public transit exists, it carries commuters to and from the central city and not many other places, as we wrote about here.

As a result, most suburban residents, including low-income families, depend on their cars. More than 94 percent of suburban households own at least one vehicle. Seventy-four percent of low-income suburban residents drive alone and 12 percent carpool to and from work, according to Brookings’ analysis of the American Community Survey Data.

But cars are expensive.

As Elizabeth and Alan write in Confronting Suburban Poverty in America, in addition to the costs of purchasing and insuring a car, low-income drivers also “face frequent and costly repairs to keep the car running because they tend to buy older, cheaper vehicles.”

This was the case for Natasha Gregory, a single mom in Waukesha, WI, a suburb of Milwaukee, who relied on a car she bought “cheap off the street” to get to her part-time job, to school at Marquette University, and home to care for her 9-year-old. When it broke down, Gregory told the Milwaukee Journal Sentinel, she “started to panic a little bit.”

“I was like, ‘How am I going to get to school?,’” she said. “’How am I going to get to work? If I can’t go to work, there is no way I can pay my rent.’”

On top of those stressors, research shows that people who live in low-income neighborhoods pay between $50 and $500 more than residents of higher-income neighborhoods for the same car, according to work by Matt Fellowes, a former Brookings fellow. In some cases, this may be because residents of low-income neighborhoods have poor credit or payment histories, but also because they are more likely to be victims of predatory lending practices that result in loans with very high interest rates.

Research from the Consumer Federation of America shows low-income residents are likely to pay more for less when it comes to auto insurance coverage as well. In California, for example, State Farm won’t sell auto insurance policies at all to young men with poor driving records from certain low- or moderate-income neighborhoods like Compton, near Los Angeles, or Sunnyside, near Fresno.

Kristina Hubbard could not afford a car with her wages at a call center in suburban Atlanta. And she was making a two-hour trip each way—on two trains and a bus—just to travel 25 miles to work. In the evenings, she told NBC News, she regularly didn’t make it to her daughter’s daycare by its 6:30 pm closing time, and incurred expensive fines.

Gregory and Hubbard both found assistance through Ways to Work, a community development financial institution that provides affordable auto loans to families facing credit challenges. Through a network of 44 loan offices across the country, Ways to Work provides low-interest loans and financial education, and partners with nonprofit, family-serving agencies that are members of its sister company, the Alliance for Children and Families.

Ways to Work clients usually have 24 to 30 months to repay loans at around an 8 percent interest rate. Ways to Work President Jeff Faulkner says 90 percent of clients repay their loans on time, despite their credit risks.

Ways to Work program evaluations show that cars enable clients to improve their employment circumstances (by pursuing promotions, and/or higher paid jobs), enroll in education programs, miss fewer days of work, increase their credit scores, and spend more time with their families.

Hubbard is paying off her two-year loan and is the proud owner of 2006 Honda, which she says allows her to get to work and daycare on time.

“I’m more confident in myself. When I go to job interviews I don’t have to plan two or three hours ahead waiting on a bus. I’m actually able to think about career moves and where I want to go and going back to school,” Hubbard said.

With its centralized lending services and program management, the Ways to Work model is an excellent example of how to create efficiency while working at scale. The organization’s established partnerships with a network of existing providers, as well as its franchise approach have enabled Ways to Work to expand to more than 50 sites in urban, suburban, and rural communities across 21 states.

It’s that kind of scaled approach that will bring needed efficiency and expertise to communities around the country struggling with suburban poverty, and help families in its midst navigate their way toward better job opportunities.

Photo/ David Hilowitz

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