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Cash for Clunkers buyers remorse?

ED MORRISSEY — Tue, 07 Sep 2010 17:42:33 GMT

We’ve written numerous times about the Cash for Clunkers program and how it stole demand from future sales, how it artificially increased used-car prices, and how it wasted taxpayer dollars by the billions in unnecessary subsidies while doing nothing for long-term sales. Until now, most have assumed that at least the buyers wound up with good deals and taxpayer-financed satisfaction. The Orange County Registerreports that the program recipients may not be as satisfied as people would assume:

Thousands of people who leased cars last year as part of the Cash for Clunkers program are having second thoughts and are trying to get out of their leases, reports LeaseTrader.com. …

“I think it’s Cash for Clunkers remorse,” Sternal says, whose company helps hook up people who want to trade out of their leases with those looking for a lease.

For some, the burden of a long lease has them looking to escape. But it’s not so much the lease as it is the car that lessees bought. Recall that the C4C program required buyers to trade certain classes of gas-guzzlers for more environmentally friendly vehicles. At the time, those cars looked attractive, but a year later, the thrill is definitely gone:

“They woke up last year and saw the Cash for Clunkers program and thought they they could help the environment and the bunnies and the trees and got smaller, environmentally-friendly cars,” Sternal says. “Now they look at that car and think about the really nice car they used to have and think ‘I want something roomier, more luxurious. This contract is bad and I’m not in love.’”

Sternal says the company started getting calls about trading Cash for Clunkers leases in May and now is getting “several hundred” calls a week.

LeaseTrader.com they are getting the most inquiries about Cash for Clunker lease trades from people with Toyota Camrys, Ford Escapes and Honda Accords.

I’m not terribly sympathetic to their plight. The C4C program was a massive waste of money and material, but no one forced people into those choices, either. The Camry and Accord are two perennially popular models, and by all accounts well-built for their class. These lessees rushed to take taxpayer money to fund their new purchases, and should have thought twice about the investment.

Still, this is what happens when the government attempts social engineering in consumer markets. It’s expensive, it creates long-term dissatisfaction, and disrupts commerce.

For some, C4C lease program was a clunker

Donna Harris — Tue, 24 Aug 2010 14:07:07 GMT

Last year's federal Cash for Clunkers program -- which paid consumers $3,500 or $4,500 rebates for trading in their old gas guzzlers for new, more fuel-efficient vehicle -- successfully stimulated new-vehicle sales.

Where it wasn't so successful was boosting the auto lease business. Few of the consumers who took advantage of the federal rebate plan opted to lease. But a year later, many of those who did are now clamoring to get out of those contracts, says Sergio Stiberman, CEO of LeaseTrader.com. Stiberman's company allows people to get out of an auto lease by swapping it with another one.

Here's the problem: To qualify for a lease under the clunkers program the customer had to sign a minimum five-year contract. For many of these people, their cars were long paid off. So after getting used to having no car payment they now have a monthly obligation for at least five years.

Who could blame them for having lessee's remorse?

Cash for Clunkers Cars Program: Boon or Boondoggle?

SHERYL NANCE-NASH — Tue, 17 Aug 2010 20:20:06 GMT

The proposition had much appeal. Trade in your beat up vehicle for a credit of $3,500 or $4,500, depending on the type of new vehicle you purchased and the difference in fuel economy between the purchased vehicle and the trade-in vehicle. Not only would participating help the ailing economy, there was the chance to be green: fewer gas guzzlers and more fuel efficient vehicles would be a boost for the environment too.

Americans took the government up on the offer that for many was too good to pass up. They traded nearly 700,000 cars in the Cash Allowance Rebate System (CARS) or Cash for Clunkers program that ran last July and August.

So was the stimulus initiative stimulating, or a $3 billion waste of taxpayer money?

Simply put, says Paul Taylor, chief economist with the National Automobile Dealers Association, it was a success. "There was a boost to car sales in July and August, and because of the industrial production boost the four months following the program, it kept some jobs in production and retail."

Taylor credits Cash for Clunkers as an important bridge, sparking sales, giving the industry enough gas to keep going until it began recovering slowly on its own. "Cash for Clunkers was one part of the stimulus package that actually did what it was supposed to."

According to the National Highway Traffic Safety Administration estimates, Cash for Clunkers resulted in a $3.8 billion to $6.8 billion increase in GDP and over 60,000 jobs created or saved. The new vehicles obtained under the program were 58 percent more fuel efficient than the vehicles they replaced, with an average combined EPA rating of 24.9 miles per gallon, versus 15.8 MPG for the vehicles they replaced, reducing fuel consumption by 33 million gallons per year. And, there was a concomitant reduction in green house gases and other pollutants.

However, not everyone is hailing Cash for Clunkers a wild success. Edmunds.com, an online provider of automotive information determined that Cash for Clunkers cost taxpayers $24,000 per vehicle sold. Of the nearly 700,000 sold, Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the program.

To conduct the analysis, the Edmunds.com team examined the sales trend for luxury vehicles and others not included in Cash for Clunkers and applied the historic relationship of those vehicles seasonally adjusted annual rate to make estimates. Estimates were independently verified through examination of sales patterns reflected by transaction data. Once the numbers were determined, Edmunds.com analysts divided $3 billion by 125,000 vehicles to arrive at the average of $24,000.

Then too, there were glitches. "Some dealers had given credit to the customer for their trade-in but it took some up to a month to get reimbursed by the government, so they had the strain of carrying that amount until they did," says Taylor.

Some didn't get reimbursed at all. The U.S. Department of Transportation says that more than 99 percent of the program rebates were approved, meaning some dealers came up short.

Ken Bennett worked at a car dealership in San Antonio, Texas, during the Cash for Clunkers program. "We probably lost $3,000-$10,000," he recalls.

A dealer could be left holding a meaningless voucher if, for example, the car traded in wasn't on the list of eligible vehicles or in one instance at Bennett's dealership, "The claim was rejected because the customer didn't keep the vehicle insured for the entire year, therefore, no claim, no money," he said.

There should have been a pre-qualifying procedure that told you if all qualifications were being met at the time of the trade. "Why not tie it all in to the proper databases, and let the system check for insurance coverage, length of registration, etc? That way, if it doesn't pass, you find out before the deal is booked, and not after the fact," says Bennett. Furthermore, some believe the program didn't go far enough. "It did not include monies for the purchase of a used car. There are many makes and models of used vehicles that would have provided similar benefits in overall fuel efficiency," says Larry Gamache, communications director for Carfax, which provides vehicle history reports. "More importantly, including used cars would have allowed far more cash-strapped, credit-crunched Americans the opportunity to acquire a new vehicle with similar stimulative effects on local economies," he adds.

While the majority of participants financed the vehicle they purchased, some 20 percent got lease deals -- a little more than 100,000 leases were written during the program. But the program required leases of at least five years.

LeaseTrader.com reports a significant trend in people that leased a car with a Cash for Clunkers rebate looking to escape the auto lease just one year into their five-year commitment. "It's difficult for these people to exit their lease because there is very little market for a used car with three or four years left [on the lease]," said Sergio Stiberman, CEO and founder of LeaseTrader.com, in a prepared statement. "Many of these people didn't have a car payment when they took advantage of the rebate. Now they have a monthly payment and five-year commitment, which is extremely unfavorable in a leasing environment."

Leasing isn't for everyone. There are mileage limitations. Leasing can also cost you more than an equivalent loan because of higher finance charges built into the monthly payment. Then too, if you don't keep the vehicle in mint condition, you'll have to pay excess wear-and-tear charges when you return it.

Change your mind and try to get out of the lease early and you could be stuck with termination fees and penalties that you have to immediately pony up. This could equal the amount it would cost had you stuck with the lease for the original term.

But mostly, the rearview mirror look at Cash for Clunkers is a good reflection -- at least for consumers if not the U.S. Treasury.

"I traded my 14 year-old Ford Winstar. I got $5,000 off the purchase price of a new Honda Civic. My old car wasn't even worth $1,000," says Dawn McKenzie. "I got a great deal and probably wouldn't have gotten a new car had it not been for this program."

Similarly, Joyce Scardina Becker and her husband chucked their 1989 Ford Bronco, nicknamed "the beast.". It had 140,000 miles, was dying and cost $75 per fill up.

"Cash for Clunkers was the answer to our prayers," says Scardina Becker. "We could have never sold the 'Bronkie' to anyone, there were too many things wrong with it. We used the $4,000 on trade-in and bought a Ford Escape. We never looked back. Thank you Obama."

Think Your Car Is a Cop Magnet?

Ted Reed — Tue, 17 Aug 2010 14:36:43 GMT

DETROIT (TheStreet) --Surprisingly, drivers of luxury cars, like the Mercedes M Class below, believe they are less likely to get away with a traffic violation than drivers of cheaper cars.

That's the conclusion of a new survey on traffic violations by LeaseTrader.com, which matches shoppers with people trying to get out of auto leases.

The Miami-based firm recently polled 2,017 drivers, asking whether they believed they could get away with a traffic violation based on what they drive. Among the drivers, about 500 owned vehicles in each of four categories: luxury, economy, mid-sized and SUV/truck. The company asked the drivers about the likelihood of getting tickets for speeding, red light infractions and parking fines.

Read on for our gallery of wheels whose owners think are most likely to flag the cops. BMW 7 Series 2011

The survey showed that 63% of drivers of luxury vehicles, such as the BMW 7 Series or the Mercedes M Class, felt they would get a speeding ticket if they traveled ten miles above the limit.

That is the highest percentage among the four groups of drivers.

In an informal poll of police officers working in Westchester County, N.Y., conducted by TheStreet, officers said that BMW drivers, in general, are "thought" to speed more than drivers of other luxury cars, upping the likelihood of being pulled over. Ford Focus 2011

Only 28% of drivers of economy cars, such as the Ford(F) Focus or Chevy Cobalt, felt they would get a speeding ticket at ten miles above the limit.

As far as running a red light, the results were similar: Among drivers of luxury cars, 62% felt they would get a ticket if they committed this infraction. But only 16% of drivers of economy cars like the Cobalt (pictured below) were similarly worried.

Drivers of economy vehicles "feel they're least likely to get a ticket running a red light, (even with) new light cameras, because of a blend-in syndrome where they feel their cars don't stand out as much as the rest," LeaseTrader said.

When it comes to parking fines, however, the tables turn, because 73% of luxury car drivers feel they wouldn't receive a ticket for parking illegally. That is "possibly because of a feeling of entitlement," said the firm. Chevy Tahoe

By contrast, only 21% of drivers of SUVs and trucks, such as the Chevrolet Tahoe or the Ford F-150, feel they would not get a parking ticket.

2010 Toyota Camry LE 008

Among drivers of mid-size vehicles, such as the Toyota(TM) Camry and the Honda(HMC) Accord, 46% felt they would get a speeding ticket if they were driving ten miles above the speed limit, and 36% felt they would get a ticket for running a red light. Also, 63% felt they would get a ticket for parking illegally.

-- Written by Ted Reed in Charlotte, N.C.

Shock uppercut that first looked like a helping hand

Kathryn Tully — Mon, 16 Aug 2010 13:32:51 GMT

The Federal Reserve has reported that US consumer borrowing dropped for the fifth month in a row in June as people cut back on credit card spending. In fact, since the onset of the recession, we have become used to hearing that US consumers have been diligently reducing their debt burden and getting more savvy about spending. After all, June was the 16th month out of the past 17 that consumer credit in the US has fallen, with the only rise coming in January this year.

However, the latest snag in the US government’s so-called cash-for-clunkers scheme launched 12 months ago paints a rather more troubling picture. It shows that some US consumers are still more than happy to take on monthly payments they cannot afford to fund big-ticket items and that the government has been more than happy to encourage them.

Under the cash-for-clunkers scheme, created by the 2009 Consumer Assistance to Recycle and Save Act, government rebates were available to those who traded in their old gas-guzzling vehicles and purchased or leased new, more energy-efficient models costing less than US$45,000 (Dh165,280). To get the maximum rebate of $4,500, a customer had either to buy an eligible car outright or sign up for a five-year lease.

Twelve months on, many people who took the lease option are finding it has come back to bite them. Some are now suffering from buyer’s remorse, having decided they do not like the cars after all, but many others are having trouble affording the lease payments now that they have spent the upfront rebate.

As a result, thousands of them have been trying to transfer their leases to other people who are looking for leased vehicles, according to Leasetrader.com, a company that matches lease buyers and sellers.

This is a tough task, because those who lease in the US usually do so to drive the latest models, so they prefer short leases , which allow them to return the cars to the dealerships every two or three years. Finding a new lessee who wants, for example, a one-year-old Ford Focus or a Honda Accord for four years is a challenge.
Finding several thousand lessees who are happy to be lumbered with year-old cars for four years will be even more difficult, and the alternative is not pretty. If they cannot find new lessees, those who cannot pay may well default on the terms of their leases in the months ahead, prompting a fresh wave of economic pain.

So the cash-for-clunkers scheme, hailed as one of the more successful efforts of the government to pump money into the ailing economy when it was launched 12 months ago, has already proved to be a double-edged sword. Yes, it stimulated the US economy during a critical period. Nearly 680,000 older vehicles were traded in for new, more fuel-efficient models, struggling car dealers offloaded their inventory, and car companies desperate to increase sales quickly increased production. According to official estimates, the scheme resulted in an increase in US GDP of $3.8 billion to $6.8bn and saved or created more than 60,000 jobs.

But, in introducing the scheme, the government exacerbated the problem that drove the US into recession in the first place – that, up until 2008, consumers were given short-term sweeteners to take on big financial commitments, whether those were cars or houses or other purchases, that they could not afford in the long term.
Unless the government wants to ensure a double-dip recession, it is probably not a good idea to encourage this behavior this year.

Americans may have cut their use of credit, but it does not mean they have been transformed over the past 20 months or so into models of financial prudence.
It might be a good idea for the US government to remember that fact the next time it asks consumers to help the economy over a hump.

Essential How-to Guide for Today's Consumers

Brad Tuttle — Thu, 12 Aug 2010 20:48:32 GMT

Here's a round-up of everything from how to cook with dried beans to how to ask for a raise, from how to negotiate for a cheaper cell-phone bill to how to figure out how much house you can really afford.

How to … get out of a Car Lease. A Mint.com post offers a four-point plan for getting someone else to take your vehicle—and take over your payments—with the assistance of a middleman site like LeaseTrader.com or SwapaLease.com; read more about LeaseTrader in this Q&A.

How to … cook with dried beans. In terms of protein, nutrition, and cost, a bag of dried beans is arguably the top overall value in the supermarket, according to Trent at The Simple Dollar, who explains some easy ways to prepare, store, and cook with them.

How to … justify illegal activities. In a discussion at Consumerist, readers have chimed in with something like 400 comments regarding which illegal activities are OK in their book. The responses include burning DVDs, marijuana, speeding, music piracy, stealing office supplies, and underage drinking.

How to … keep silly consumerism alive through your kids. Specifically, through babies: You can purchase designer diapers and/or $35 skinny jeans for infants and toddlers. Need I mention that the diapers we're talking about are disposable, and that it's hard enough to get regular pants onto squirming toddlers, let alone skinny jeans? This one could also be categorized as: How to … buy into trends that'll look ridiculous in a few years; and How to … demonstrate that the "new era of frugality and value" we've heard so much about might not last as long as experts claim, and that it sure as hell doesn't apply to all consumers.

How to … stop shopping momentum. One purchase can quickly lead to four more. A GetRichSlowly post suggests ways to stop the snowball from rolling—and turning into an avalanche.

How to … ask for a raise. The best strategy is to prove you're worth the extra money to your boss, with real numbers to back up your claims. PopEconomics (via SmartSpending) explains, and also gives advice on when's the best time to ask for a bump up in pay (right after someone leaves your department and the company is looking to hire a replacement).

How to … prepare for losing your job. These days, it seems like losing a job is more likely than getting a raise. To prepare for the worst, Bargaineering says you must mind the basics, which aren't that difficult or time-consuming: Build up a solid network of contacts, keep your resume updated, and have an emergency waiting to hold you over until you land another gig.

How to … leave your job like a pro. Grabbing a beer, cursing everyone in sight, and zipping down an inflatable emergency slide is inadvisable, according to the Boston Globe. Instead, it is better to take more professional—yet certainly less memorable—steps like writing a proper letter of resignation, giving ample notice, getting all the details about your compensation package, and keeping up with your work until your very last day.

How to … quit a job before you've started. Oh boo-hoo, you're supposed to start a job in a few months, but a better opportunity has come your way and you don't know how to tell the original company that you're no longer on board. The advice in a WSJ Q&A consists mainly of: Man up, call the original person who hired you, and tell him or her what's up. This isn't a situation when e-mail is OK; a phone call is the professional thing to do.

How to … skip college and make money fast. Sounds like an infomercial come-on, and sure enough WalletPop's list of 10 careers that don't require college degrees either don't pay particularly well (bus driver) or don't come particularly fast (director of security). But hey, no college degree required—so that's potentially a lot of tuition money you won't be spending.

How to … negotiate your way to cheaper cable TV and wireless bills. Study up on all the options from competitors (promotional offers included), and be truly ready to drop your current plan. In other words, call up customer service and make it known that you know there are better options available, and that if you don't get a better offer, you'll switch, simple as that, per a USA Today story filled with negotiating tactics. If you do nothing and continue paying bills without asking for a better offer from time to time, you're all but guaranteed to see those bills rise and rise, according to consumer expert Bob Sullivan.

How to … complain online and maybe even get results. A Baltimore Sun story explores e-complaining, listing sites like My3Cents.com where consumers can gripe, bitch, and vent about companies that have done them wrong via fraud, shoddy merchandise, awful customer service, and anything else. Twitter is known to be useful for e-complaining as well.

How to … save big time by shopping for groceries every three months. A guest poster at GetRichSlowly explains how she buys on the cheap, how she stores up thanks to her pantry and her freezer, and how she cut her grocery bill down from over $500 a month to an average of $164 per month.

How to … find coupons online. It's not difficult, and there are a million ways to go about this, but here's how Silicon Valley Blogger rounds up her coupons.

How to … figure out how much house you can afford. The Atlantic's Megan McArdle, a self-described "fiscally conservative" individual who is in the market for a home, is aiming for at least 10% down (hoping for more like 20%), with a mortgage of no more than 2.5 times their annual income, and only with a fixed-rate mortgage, among other careful considerations.

How to … walk away from billions of dollars in home equity loans. The NY Times reports how in 2009, lenders wrote off billions in home equity loans and home equity lines of credit because countless numbers of borrowers were unable to pay their debts and their collateral—typically, their homes—are now worth a fraction of what they were when the loans were agreed upon.

Cash for Clunkers: 1 Year Later

Brian O'Connell — Thu, 12 Aug 2010 20:05:52 GMT

It’s the one-year anniversary of “Cash for Clunkers,” but apparently, the financing option didn’t pan out so well and consumers are feeling “clunker” remorse.

Many auto lease consumers want out, at least according to LeaseTrader.com, which released a report on Aug. 3 showing a growing number of consumers who leased a car under the “Cash for Clunkers” plan introduced last year regret it.

The main problem, according to Miami-based LeaseTrader, are the lease mandates issued by the federal government. To qualify for the Cash for Clunkers discount, lease customers had to sign up for five-year deals, but that’s turning out to be too long and expensive for the lessees. Five-year leases put wear and tear on a vehicle — wear and tear that customers pay for after returning the car when they’re done.

According to LeaseTrader, the company, which matches people wanting to get rid of their leases with people willing to take them over, says they’re receiving about 150 calls per week from people wanting out of their Cash for Clunkers lease deal. Mostly it’s because they’re worried about the economy, or may have lost their jobs and thus can’t make the payments. Others want out simply because they’re bored with their new vehicle.

John Sternal, a vice-president at LeaseTrader, says these customers are suffering from “clunker remorse.” Unfortunately, these lease owners put themselves in a box — not many people want to take over a Car Lease with 30 months or more left. The optimal “takeover” lease timetable is 15-18 months, says LeaseTrader.

“They still have 48 payments left and few people on the buying side are interested in taking over a lease longer than 30 months,” Sternal says.

LeaseTrader’s CEO, Sergio Stiberman, agrees. "It will be difficult for these people to exit their lease because there is very little market for a used car with three or four years left," Stiberman says. "Many of these people didn’t have a car payment when they took advantage of the rebate. Now they have a monthly payment and five-year commitment, which is extremely unfavorable in a leasing environment."

LeaseTrader points to a Ford (Stock Quote: F) Focus, which was a popular choice for Cash for Clunker lease customers.

With a newly-redesigned Focus due out in 2012, a current Ford Focus owner with only one year’s worth of lease payments will have a hard time finding someone to take over the lease from his 2009 vehicle.

Cash for Clunker lease customers seem stuck. While they don’t have to relinquish the rebate, they’ll have to keep making those monthly payments — for four more years.

How To Get Out of a Car Lease

Susan Johnston — Thu, 12 Aug 2010 14:11:22 GMT

That multi-year lease on a shiny new sports car may have seemed like a good idea a few years ago, but now it doesn’t fit your lifestyle or your budget. Or maybe you’d paid off your car and got lured in by a five-year Cash for Clunker lease and a government rebate.

The good news is, it is possible to get out of most auto leases by transfering them to someone else. Sergio Stiberman, CEO and founder ofLeaseTrader.com, an online service that enables lease holders to find people willing to take over their contracts, people do it for a variety of reasons: a desire to upsize or downsize, a job loss, or relocation to an area that doesn’t require a car.

Want to exit your Car Lease gracefully? Here’s what you need to know:

1. Check your lease terms
Some companies, like Honda Financial Services (the financing arm of Honda Motor Co. (HMC)), allow lease transfers or assumptions only under special circumstances. Other companies allow lease assumptions but not in the final year of your contract. Or they keep the original lessee accountable if the new one stops making payments.

The latter should be a red flag for any lease holder, says Tarry E. Shebesta, president ofLeaseCompare.com. “When you do an assumption, make sure you’re totally off the hook, so if they turn it in and they owe miles and wear and tear, you’re not still on the hook.”

In addition to that, you can expect to pay fees for transfering your lease. Those usually run up to a few hundred dollars, but that’s often negotiable with the person who assumes your lease, Shebesta says.

LeaseTrader has a chart showing restrictions and fees for various car companies; however, it’s smart to check your own contract, too.

2. Post your listing
In addition to LeaseTrader.com, you can also use SwapaLease.com. You’ll want to have your lease contract in front of you for filling out internet forms with information like lease terms, model, make, and more.

Stiberman says most of the leases listed on LeaseTrader.com are transferred within two to three weeks of when they’re first listed. “Some deals will never get out, but you have the deals that get out quickly,” he says. “Demand for these cars is high. It makes so much financial sense to take over a lease, because there’s no down payment and the terms are shorter.”

That’s why it’s generally easier for lessees with low mileage and a shorter time frame to find a match. Not surprisingly, it’s been challenging for Cash for Clunkers lessees to exit their five-year leases after just a year. According to Stiberman, “unless you have a very appealing monthly payment or a lot of mileage available, it’s going to be very difficult to persuade another lessee to take over your lease.”

3. Get the car inspected
Many leases are transferred across state lines, so you’ll want to get the vehicle inspected beforetransporting it to the new lessee. Depending on the situation, you might be transporting the car yourself or paying a shipping company.

“Whoever assumes that lease is [usually] going to be on the hook for any wear and tear charges,” says Shebesta. “But the person who’s letting the lease go wants to take care of everything.” Shebesta recommends taking the car to an authorized dealer for inspection and repairs, if necessary.

4. Consider the tax implications
In addition to coordinating transportation, out-of-state lease transfers introduce another challenge: taxes. Some states tax a Car Lease based on the upfront purchase price and others base it on the monthly payment. Transferring a lease to someone in the same state generally involves few, if any, tax complications. But out-of-state transfers get tricky when one state taxes one way and the other state has a different system. Even if the two states are on the same system, the tax could go up or down, so the new lessee will want to know that.

Figuring out all that stuff in itself may be frustrating to deal with. “The problem is, it depends on who you talk to at the DMV,” explains Shebesta. “You may call the DMV three times and get three different answers to the same question. And if you’re paying on the monthly payment and you go into a state that collects upfront, that’s where it’s going to get shady.” Whatever the tax situation, Shebasta suggests that the new lessee get the rules in writing from the state’s department or registry of motor vehicles.

In most cases, transferring your lease makes more sense than paying for parking, insurance, and a car you don’t use or simply dumping the vehicle at the dealership and stopping payments (that’s called a voluntary repossession and it will impact your credit). In case you find yourself negotiating with your leasing company, Stiberman offers this word of warning: “Don’t roll over your lease into your next car.” Instead, see if you can finish the lease or transfer it to someone else.

Clunker remorse (or, ‘I sold my clunker, so why am I in one?’)

Jesse Snyder — Wed, 11 Aug 2010 15:15:28 GMT

In the mania that was the cash-for-clunkers stampede a year ago, few noticed a little provision in the program that allowed 60-month vehicle leases to qualify for Uncle Sugar’s $3,500 or $4,500.

That is, few beyond eagle-eyed sales and F&I managers. A year later, there’s maybe 100,000 five-year leases among the 700,000 clunker deals.

That anybody would opt for a five-year lease seems odd. Make 60 monthly payments, then pay repair and excess mileage fees to give it back?

But I know the siren call of cash from the government. And I can almost hear a showroom conversation: “You know, if you’re willing to lease a few extra months, Uncle Sam could help you move from this [insert name of practical vehicle] into a [shiny object of desire] for the same monthly payment.”

Well, it’s a year later. And sure enough, some of those 60-month leasees want out.
“It’s clunker remorse,” says John Sternal, vice president of Leasetrader.com, an outfit that matches people wanting out of a lease with people willing to take over payments.

The calls started in April. Now LeaseTrader.com is getting about 150 calls a week from people who want out of the five-year leases they signed to get clunker cash.
Some lost their jobs and worry about making lease payments. Others worry about unemployment rates and the economy. And surprise, surprise, some lease customers are bored and just want a new ride. They may have traded in one clunker but they’re in another.

“But they still have 48 payments left and few people on the buying side are interested in taking over a lease longer than 30 months,” Sternal says. The firm’s buy-side customers prefer leases with 16 to 18 months left.

So if that clunker-era long-term lease feels too expensive or just stale, is there an option besides parking it to afford the payments?

Nope, says Sternal.

“They’ve just got to sit on it.”

Financial strategies that can help consumers chip away at credit card debt

Maryanne Kocis MacLeod — Tue, 10 Aug 2010 13:21:14 GMT

Unemployment, underemployment, salary cutbacks, divorce, medical emergencies and ballooning house payments all take their toll on household finances.

For many residents of Michigan and the United States, this perfect storm of market conditions has resulted in skyrocketing credit card debt.

According to information gathered by the U.S. Census bureau, there were approximately 173 million credit card holders in the United States in 2006; a number projected to grow to 181 million this year. Americans charged approximately $1.950 billion in 2006 — just over $11,300 per cardholder

At the same time, Americans carried approximately $886 billion in credit card debt — a number expected to grow to a projected $1.177 billion by the end of this year.

"People from all walks of life are struggling more with personal finance than ever before," said Jean Lakin, extension educator and child development expert in the Family Resource Management division of the Macomb County MSU Extension.

The first step in tackling the problem is freezing your credit cards.

Literally. "I tell people to put them in a plastic container filled with water, then leave them at home — inside the freezer," said Debra Studebaker, a family and housing educator for the Macomb County MSU Extension. "You are less likely to use them if you can't easily get at them. It's not like you can put them in the microwave. It sounds simple, but it's not: We have to remember overuse of credit cards is how people get in trouble in the first place."

It isn't easy, but individuals have to stop racking up credit card charges if they wish to chip away at debt, Studebaker stressed.

The next step is to look your debt in the eye.

"People hate doing it, but it's necessary to begin tackling the problem," Studebaker said. "Get a simple lined piece of paper and write down how much you owe, to whom and at what interest rate, along with your monthly payment."

It's difficult to begin addressing a problem if you don't know how big it is.

For those unable to keep up with their payments, Studebaker recommends tackling secure debt first, meaning mortgage and car payments, saving credit card payments for last.

"This means paying on anything they can take away," Studebaker said.

Saneya R. Hamler, an extension educator in Oakland County, reminds us to be certain to make monthly payments in a timely fashion to avoid late fees and protect credit.

Once everything has been assessed and the total amount owed has been determined, it's time to create a payment game plan.

"Break it down into small, manageable monthly goals," Studebaker said. "Once you get started, regularly measure how well you're doing. Your goal should be to become debt free."

Another possible strategy, Hamler said, is to pay the minimum off of all credit cards, except for one, the one with the lowest balance. Then put as much as possible on the one with the lowest balance until it's paid off..

At this point, it would be helpful to become assertive with creditors. Although the days of taking great pains to keep a customer's business are gone, Studebaker said, it is often still beneficial to discuss options with credit card companies.

"Call lenders ahead of time to see if they will work with you," Studebaker said. "See if they will waive late fees, lower interest rates or allow you to skip payments. If that doesn't work, ask to speak to their supervisor. And then their supervisor. Until something comes together."

Those with stronger credit reports, Studebaker said, will likely receive a warmer reception.

If existing lenders aren't willing to lower payments, it's time to begin transferring balances to another card with a lower interest rate; it's also worth looking into obtaining a loan from a credit union to pay off debt at a lower interest rate.

"Credit unions often have more money to work with and are more willing to work with new clients than banks are," Studebaker said.

Seeking the help of a reputable credit counseling service may be the best bet.

Agents can intercede on your behalf with lenders to help hack away at debt.

Ethan Goldman of LeaseTrader.com recommends several online tools to shop for better deals on credit card rates, rental costs and automotive leases. These include:

BillShrink.com
Rentometer.com
LeaseTrader.com

Keep in mind that your difficult financial situation is likely temporary. With that thought in mind, consider taking on a second job to help make ends meet.

"Maybe just for a year, or three at most," Studebaker said. "Just until you're able to reduce debt and/or general finances improve."

If, however, your financial picture is especially grim, it might be worth it to consult a bankruptcy attorney, Studebaker said.

"Bankruptcy doesn't hold the same stigma — with people and creditors — that it once did," Studebaker said. And in many cases, new credit can be obtained within two or three years.