In October 1999, Port Jobs issued its first report on car ownership programs, entitled Working Wheels: A Guide to Overcoming Transportation Barriers to Work. Our research on that project found the following:
Since then, Port Jobs has been working to create a car ownership program that would serve low-income workers and job seekers in King County. We have also conducted further research into car ownership as an employment strategy. As part of this research process we received funding from the National Economic Development and Law Center to complete site visits to seven of the largest and most promising car ownership programs in the country.
This report, Working Wheels Update, outlines the lessons we learned in our most recent research, which we are using in the creation of our King County program. Our key findings include the following:
Transportation
barriers to work
Lack of transportation has always been a barrier to work, training and educational opportunities for economically disadvantaged people in several different ways. Some jobs require a car. Many jobs and training programs are located in areas with little or no public transit service. Over the past thirty years jobs have migrated to suburbs far from low-income communities. Furthermore, many parents cannot get children to school and day care then to work on time by bus. In suburban and rural areas with extremely limited public transit, this problem is often greater than in urban areas.
Where lack of transportation is not a barrier to work, it can be a barrier to finding a family wage job, or to training and education. Recent studies of commute patterns show that people in low-income households make about 20% fewer trips per person than people in other households, and they travel nearly 40% fewer miles (Murakami &Young, 1997). This means that low-income people make fewer trips and go shorter distances than wealthier people when they do travel. By acquiring a car a low-income person can travel farther to look for work, and can take a better paying job farther from home, rather than having to accept a lower wage job close by.
Interest in solving transportation barriers to work
systematically has taken higher priority since passage of the 1996 Personal Responsibility and Work
Opportunity Reconciliation Act (PRWORA, commonly referred to as “welfare
reform”). With time limits on welfare
benefits in place, it suddenly became much clearer that many individuals cannot
get to work because of transportation-related barriers. If an individual quite literally cannot get
to a job, she will be unable to leave welfare.
The Office of Port
JOBS began studying this problem in detail in 1999, with our first research
report, Working Wheels: A Guide
to Overcoming Transportation Barriers to Work. We found that a growing number
of organizations are starting nonprofit car ownership programs as a strategy to
overcome these problems in their community.
We also learned that creating a car ownership program can be
challenging: it requires acquiring used cars, repairing them to good working
order, distributing them to clients who have been carefully screened, and
addressing complex driving-related issues such as driver’s licensing and auto
insurance.
This is a follow-up
to that initial report. In 2001, as
Port Jobs was in the process of research and development on a car ownership
program for King County, we conducted a much more in-depth study of car
ownership programs nationwide, in partnership with the National Economic
Development and Law Center. To do this
we gathered information from staff at nearly thirty such programs around the
country, and conducted site visits at seven of the most promising.
What follows in this report are the results of that study, which are being applied as we create a car ownership program for low-income workers and job seekers in King County. It begins with a description of the national trend in car ownership programs that we identified. This is followed by a discussion of how states have invested in car ownership as an employment strategy, especially for welfare recipients. The seven programs themselves are described next, including three tables comparing key components of each. Next we review emerging research on the impact of car ownership on work and earnings. Finally, we present lessons learned from our research.
National trend in
car ownership programs
Programs to help low-income workers and job seekers purchase the cars they require to get to work are on the rise nationally. In 1999 we found a handful of such programs. In updating our research two years later we have talked to staff at nearly thirty programs, and estimate that there are at least fifty such programs across the country today (see Appendix 1 for a full list). This count does not include well-known programs such as Esperanza Unida, which is primarily an auto mechanic training program, or church car ministries that serve only their own members. If we included all such programs, the count would be significantly higher.
Most of these programs were created after the passage of the PRWORA in 1996, and most of them generally serve current and recent recipients of Temporary Aid to Needy Families (TANF). Many programs also serve other low-income workers and job seekers, generally those earning up to 150-200% of the federal poverty level. As a result, most car ownership programs help single mothers buy cars they could not otherwise afford. These programs range widely in size, from ones that provide five cars a year to clients, to statewide programs providing 1,600 per year.
Car ownership as an employment and anti-poverty policy and strategy is beginning to be studied more systematically. In the past two years organizations including the National Council of State Legislatures, the Progressive Policy Institute and the Center on Budget and Policy Priorities have issued reports on transportation barriers to work and the role of car ownership programs in solving them (see Appendix 2 for a selected bibliography). These studies have found that while traditional approaches to transportation for the working poor and welfare recipients generally do not include car ownership strategies, a growing number of states, nonprofit organizations and communities are pursuing car ownership programs.
At the same time that lack of transportation was being recognized as a barrier preventing welfare recipients from going to work, states began accruing “caseload savings” from their shrinking TANF populations. States invested these funds in a variety of programs for current and former TANF recipients, as well as programs to prevent low-income workers from joining the welfare ranks. Several states invested in car ownership programs, some to a significant degree. For example, in fiscal 2000-01, Georgia invested $10 million to provide 1,600 cars statewide through its Wheels to Work program. In 1999 the Arizona state legislature set aside $2.4 million for a statewide car ownership program, also called Wheels to Work, which is administered by Goodwill of Central Arizona.
Seven promising
car ownership programs
Through our research we identified seven programs that offer promising models for other communities interested in creating their own car ownership programs. These programs are (in alphabetical order):
Each of these
programs acquires used cars (either by donation from the general public or
public fleets, or by purchasing them) reconditions and repairs them to working
order, then sells, leases or donates them to low-income workers and job
seekers. Most of these programs are
funded at least in part by their state TANF agency, but serve other low-income
people as well.
Arizona
Wheels to Work is a statewide car
ownership program created in 1999 by an act of the state legislature. Administered by Goodwill of Central Arizona
in Phoenix, Wheels to Work provided 283 cars to TANF recipients through a
lease-to-own program in its first year.
The state offers up to $1,500 in tax credits to individuals and business
that donate cars to the program, but limits Wheels to Work to only accepting
cars that can be used for the program.
In its first year Wheels to Work leases ran for a full year, during
which time all safety items on the car were covered by warranty. Due to recent funding cuts, the lease period
has been cut to six months in 2001-02.
Charity
Cars was originally founded in 1996
to give cars to low-income residents of central Florida. After receiving extensive national media
coverage, the founder, a former used car dealer, expanded the program
nationwide in 1999. Charity Cars
distributes cars donated by the general public through a national system of
“affiliates,” which can be nonprofit, government or for-profit
organizations. Once an affiliate has
produced enough car donations from within its local community to offset Charity
Cars’ costs, the program donates cars to that affiliate’s clients. Charity Cars gave away 330 cars in
2000.
Citrus
Cars was founded in 1998 by the
Polk County Workforce Development Board, whose president at the time was the
owner of a local Ford dealership. The
program, which provided 125 cars to clients in 2000 through two-year leases, serves
a suburban and rural county halfway between Tampa and Orlando in central
Florida. Title to the car is handed
over to the client, after she successfully completes two years of
payments. Citrus Cars purchases its
cars from used car dealers and auto auction houses.
Georgia
Wheels to Work is one of the oldest
programs in the country. It originated
in 1992 as “Peach on Wheels,” a small, local car ownership program based in
rural northeast Georgia. In 1999 the state
legislature invested $10 million in expanding the program statewide, with the
goal of selling 1,600 cars to TANF recipients and applicants in 2000-01. Wheels to Work is administered locally by 11
regional Resource Conservation and Development Councils and one nonprofit
agency, and at the state level by the Georgia Environmental Facilities
Authority. Each region runs its car
program differently, but most purchase vehicles from used car dealers then sell
them for the purchase price to clients, with no downpayment required or
interest charged.
Getting There serves a three county region south of
Minneapolis, MN. Founded in 1994 by the
local CAP Agency, the program accepts donation of cars, then sells them to TANF
recipients and other low-income agency clients. Getting There sold 54 cars in 2000 through two-year loans that
are administered by local banks. The
program supplements its funding with an extensive grassroots network of
volunteers and donors, and strong partnerships with other nonprofit service
agencies and churches in the community.
Good News Garage is unique among car ownership programs in
that it owns its own garage and hires its own mechanics. Good News Garage repairs the cars donated to
the program, then gives them to TANF recipients in Vermont and low-income
clients of other state programs, in exchange for the cost of repairs. The cost of repairs is generally paid up
front, most often with state support services funds. Founded in 1996, the program gave 232 cars to clients in 2000. Good News Garage is currently expanding into
Connecticut, Massachusetts and New Hampshire.
Vehicles for Change, based in Elkridge, MD, was founded in 1999
in part with funding from a national after-market car parts company. The program now serves TANF recipients and
clients of several nonprofit agencies in two Maryland counties and Baltimore,
and is expanding into northern Virginia and Washington, DC. Vehicles for Change sold 140 cars to clients
in 2000 through loans administered by a regional bank.
Car ownership
programs are complex, involving management of a large stock of cars as well as
providing clients with a comprehensive range of services. Creating a program in King County will
require establishing strong internal organizational management systems,
ensuring that clients are provided with appropriate finance tools, and creating
mechanisms for ongoing self-monitoring and evaluation.
Nearly all of the
programs studied have their cars inspected, reconditioned and repaired by local
auto repair shops prior to being sold, leased or given to clients. The shops often give a reduction in their
parts and/or labor rates, sometimes offering the car programs a fleet
rate. Most of the car programs that
accept donations of vehicles from the general public sell those cars that are
of too poor quality or too expensive to maintain at auto auctions, in their own
lots or to a scrap yard. Proceeds from
those car sales are reinvested in the car program. Some programs salvage parts from cars being sold to repair one
that is going to a client, in order to further reduce costs.
All of the programs
require that clients must need to car to get to work in order to qualify for
the program. They also require that the
client have a valid driver’s license, a relatively clean driving record, and she
must be insurable. Most of the programs
have requirements for keeping the car that are effective during the payment
period, which may include requirements that the client remain employed, keep
her driver’s license and/or maintain insurance coverage. Not all programs will repossess the car for
noncompliance, however.
All of these programs indicate that they are willing to be flexible and work with a client who runs into unexpected expenses and cannot make a payment, if that person has a good track record of trying to meet her obligations. Similarly, some of these programs will provide additional repairs beyond the warranty for good clients with car problems.
Table 1 compares additional organizational elements of the seven programs in this study.
|
|
Arizona Wheels to Work |
Charity Cars |
Citrus Cars |
Georgia Wheels to Work |
Getting There |
Good News Garage |
Vehicles for Change |
|
Source of cars |
Donation from general public |
Donation from general public |
Purchases
cars |
Purchases cars |
Donation
from general public |
Donation
from general public |
Donation
from general public |
|
Annual
operating budget (2000) |
$2.4
million |
$3.2
million in 2001 ($10-20 million in 2002) |
Unknown |
$10
million statewide in fiscal 2000-01 |
$198,000 |
$775,028 |
$675,000 |
|
Funding
sources |
State
TANF agency – funds allocated in state budget |
Sale of
vehicles, Foundation grants |
State
TANF agency |
State
TANF funds, Oil overcharge settlement funds |
State
TANF agency, Foundation grants, Sale of donated cars, Donations from churches |
State
TANF agency, Foundation grants, Sale of donated cars, church donations |
State
TANF agency, Nonprofits contracts, Grants from foundations and corporations |
|
Parent
organization |
Goodwill
of Central AZ |
Self |
Polk
County Workforce Dev. Board |
Resource
Conservation & Dev. Councils
& Georgia Environmental Facilities Administration |
CAP
Agency of Scott, Carver & Dakota Counties |
Lutheran
Social Services of New England |
Self |
|
Location served (urban, suburban, rural or all of
the above) |
Arizona
(all) |
Florida
and national (all) |
Polk
County, FL (rural & suburban) |
Georgia
(all) |
3
counties south of Minneapolis, MN (suburban) |
Vermont
& Massachusetts - expanding to New Hampshire & Connecticut (All) |
Baltimore
& 2 suburban counties – expanding into DC & N Virginia |
|
Number
of staff |
6 FTE |
15 FTE |
1.5 FTE |
22 FTE
statewide |
1.5 FTE |
11 FTE |
5 FTE |
|
Year
of inception |
1999 |
1996 |
1998 |
1992
(went statewide in 2000) |
1994 |
1996 |
1999 |
These car ownership programs provide two things to their clients that make the cars more affordable. First, the cost of the car sold to the client is usually less than its market value. Second, the programs provide affordable credit, for which most clients are unable to qualify on the open market. The cars are sold or leased on a monthly payment plan, usually over one or two years. In addition, most of these programs pay the first three to six months of auto insurance for the client (or it is covered by the state TANF agency). All of them offer some type of warranty on the car, ranging from thirty days to a year. Again, this work is usually contracted out to local auto repair shops. Table 2 compares the different financing methods used by the car ownership programs.
|
|
Arizona Wheels to Work |
Charity Cars |
Citrus Cars |
Georgia Wheels to Work |
Getting There |
Good News Garage |
Vehicles for Change |
|
Sell, lease or donate car to client? |
Lease |
Donate |
Lease |
Sell |
Sell |
Donate
(for the cost of repairs) |
Sell |
|
Cost of car to client |
$240 ($120 after July 1, 2001) |
None |
$609.50 |
Average $2,000-5,000 |
$750
+ 5% interest charged by bank |
$1,000
– 1,200 (usually paid by support services funds) |
$700-1,000
+ 2% over prime charged by bank |
|
Monthly payment amount |
$20 |
None |
$25
+ $1.50 tax |
10% of total budgeted earnings or $50, whichever is higher |
Average
$33 |
Not
applicable – total paid up front |
$55-85 |
|
Warranty offered |
1 year on safety items (recently reduced to 6 mos.) |
30 days on essential items |
60 days drivetrain |
30 days on major engine, transmission & related repairs |
60 days major engine or transmission |
30 day limited warranty |
6 months or 6,000 miles drivetrain and safety items |
There are several ways to measure program performance, including the number of cars placed/clients served, and client default rates. Table 3 compares performance between the car ownership program, using information commonly collected by most of the programs.
|
|
Arizona Wheels to Work |
Charity Cars |
Citrus Cars |
Georgia Wheels to Work |
Getting There |
Good News Garage |
Vehicles for Change |
|
Number of cars placed in 2000 |
283 |
330 |
125 |
1,600
statewide (goal) |
54 |
232 |
140 |
|
Average value of cars placed with clients |
$2,421 (14
years old, 110,000 miles) |
$3,500 (10
years old, 100,000 miles) |
Max
$5,000 (100,000 miles max) |
$2,000-5,000 10
years old) |
$2,000
(120,000 miles) |
(6-10
years old, 140,000 miles) |
$4,000
(10 years old, 110,000 miles) |
|
Cost
per car to place |
Single
rate charged to state TANF agency |
$1,500 |
Not
available |
$6,250
(includes all statewide administrative costs) |
$2,600 |
$2,500 |
$2,800 |
|
Loan or lease default rate |
17% |
Repossesses only at the request of referring agency, who pays the
cost |
6% default rate |
2-3% |
5-6% loan default rate; does not repossess any cars. |
Not applicable |
7% default rate; 9 repossessions |
|
Major causes of default |
Not keeping employment |
Not applicable |
Not keeping up with insurance payments |
Non-payment of loan |
Not applicable – only loan defaults are tracked. |
Not applicable |
Unknown |
Creating a car ownership program also requires establishing systems for acquiring cars, repairing and reconditioning them, then making them available to clients in a fair, systematic way. There are several different ways this can be done, and the final decision should be driven by the founding agency’s goals, mission and strengths.
Acquiring cars The car ownership programs studied here acquire their cars in one of two ways – they either take donations from the general public, or they purchase the cars at auction or from wholesalers. Each method has associated costs and benefits, and a car ownership program should choose how it acquires cars based on its resources, partners and mission. Table 2 below shows the trade-offs in costs. It is important to note that all of the programs studied here invest some money in reconditioning and repairing their cars up front, whether they buy the cars or accept them by donation.
|
|
Accept donations |
Purchase cars |
Major costs |
Need
staff to screen each car over the phone or in person; Requires trained
mechanic (on staff or vendor) to review each car |
Each
car must be paid for |
|
Major
benefit |
No
initial payment costs; Cars not used by the program can be sold and the
revenues invested back in the program |
Inventory
and quality control |
|
Control
of inventory |
Dependent
on flow of donations |
Can
control inventory better, but may want to schedule purchases around times
when market prices for used cars are lower |
|
Quality
control |
This
can be done through careful screening over the phone to screen out cars that
do not run, and through screenings by qualified mechanics |
Allows
for better quality control, but does not completely eliminate problem cars |
|
Other
costs |
Need
a tow truck and driver or volunteers to transport cars accepted for donation |
|
To date, there is only limited research on the affect of car ownership on work and earnings, or of the impact car ownership programs have on their clients. What exists, however, indicates that this is an effective strategy.
Overall, researchers have found that welfare recipients who own cars are more likely to be employed than those that do not. Also welfare recipients who own cars are employed more hours and earn more than those that do not own cars (Ong, 1996, Raphael & Rice, 2000). Others have found that having access to a car shortens periods of unemployment (Holzer et. al., 1994). Holzer’s research discovered that owning cars increases wages more for African American workers than for white workers. Raphael and Rice also found that the impact of car ownership on earnings is greater for low-skilled workers than for higher skilled workers. Perhaps most important, they found that it is the car that leads to increased earnings and not higher earnings that lead to car ownership.
Preliminary studies have been done on the impact of two of the programs reviewed here. In their study of Good News Garage, Lucas and Nicholson (2000) found that clients of the program who were also on welfare had increased earnings and decreased dependence on state support payments after receiving a car. They also found that the per car amount the state TANF agency paid Good News Garage for their services was recovered within five months in the form of reduced state support services payments to the client who received the car.
A baseline study of the characteristics of 48 clients of New Leaf Services, the nonprofit administering the Georgia Wheels to Work program in Atlanta, found that the average client is in her early 30s, has three or fewer children living at home, works 38 hours per week and earns $9.17 per hour (Griffith, 2001). These clients most valued their cars for getting to work, and providing increased access to both medical and childcare. Future studies are planned to determine the impact of New Leaf’s car program on these and other clients.
Research on transportation-related barriers to work and the effect of car ownership on earnings, combined with information available from the programs studied here, provides lessons on how to create a car ownership program that other organizations and communities could use to create their own programs. The ideal car ownership program would include all of the following elements.
Case management Car ownership and long-term payment plans can be significant challenges to economically disadvantaged individuals – cars break down, and emergency expenses arise. The best way to ensure success in both areas is to require that each program client have a case manager who will work with her throughout the payment period. None of the car ownership programs studied here offer direct case management, but have the agencies that refer clients to the program provide it.
Partner with banks and credit unions Finding a financial institution to administer the car loans or lease payments is a tremendous challenge, but one that can provide significant benefit both to the car program and its clients. Banks and credit unions have the ability to integrate these car loans into their existing systems, which saves the car program from having to build a payment tracking system internally. Loans that go through banks or credit unions will have the added benefit of improving a client’s credit score as she pays back the loan. However, convincing a financial institution to take what appears to be a high risk for them may be difficult, and the car program may need to add a “sweetener” to make the deal more attractive. If no bank or credit union is willing to participate, it may be possible to find an interested Community Development Financial Institution (CDFI) that has experience lending to individuals with poor credit.
Training and education Preparing clients to be responsible car owners is an important part of making sure that the car does not become an additional financial or legal burden for them. Few programs have had much success in integrating training elements into their programs, but the potential benefits are probably worth the effort. Training elements should include personal financial management (to prepare clients to successfully complete a long-term payment plan) and basic auto maintenance (to prepare them to take proper care of their car so it will run better, longer). Safe driving or accident avoidance training could also be added, as appropriate.
Structure payments to include all car ownership costs The full cost of car ownership includes not only car payments, but also gas, auto insurance, maintenance and repairs. Most of the programs studied here screen out clients who cannot afford to own a car yet, and most of them learned through experience that it is necessary to include all of the costs of car ownership when determining whether a client can afford the car. Otherwise, clients will fall behind on payments in some area, and the car will become a burden instead of a way to work.
Staff with industry-related experience Hiring staff with experience in the auto industry may be one of the best investments a car ownership program can make. Ideally, this would be an individual who has worked in the used car business. These individuals have contacts in the industry, know good cars from bad ones, understand how to make the most of a used car, and know who in the local industry is reliable and who is not. This can be invaluable knowledge for deciding which cars to buy or accept for donation, identifying reliable mechanic vendors, and for negotiating the used car world. It is important to note that this experience is likely to cost more than many nonprofits are accustomed to paying in wages. All of the programs studied here have at least one staff person with some kind of auto industry experience.
Tracking success While studies are beginning to show the positive effects of car ownership programs (see below), questions remain about their efficacy. Future funders will want to see the positive impact of the program on clients. It is also important to track the cars and the payments on them. For all of those reasons, creating a good system to track cars and clients should be an integral part of any car ownership program.
Car ownership can be an effective strategy for helping low-income workers and job seekers get and keep jobs, for increasing their earnings, and for helping welfare recipients transition to work. With a car, individuals can search a wider geographic area for work, apply for jobs that require a car, and take their families to a greater variety of educational and recreational opportunities. A well-designed car ownership program can also help people repair and build their credit, which can be as great a benefit as the car itself. Some people will need assistance becoming responsible drivers and car owners, while others will need assistance learning how to successfully complete a long-term payment plan.
Car ownership is not for everyone, however. A community striving to meet the transportation needs of all its low-income citizens must invest in public transit in the communities where car ownership is lowest, and create carpool and paratransit programs. All these things combined can lead to increased mobility and better access to jobs for the economically disadvantaged.
Appendix
1: Car ownership programs contacted by
Port Jobs
|
Program |
Source of Cars |
Start Date |
Placements |
|
Cars
for Careers |
Donation |
1997 |
75
in 3 years *35
annually |
|
Cars
for Jobs (Wheels
to Work) |