Car Ownership Programs for Welfare and Low-Income Families

Welfare Reform Project
NCSL LEGISBRIEF - August/September 1998 - Vol. 6, No.32

The Keys to Employment

By Dana Reichert

Most Americans view cars as a necessity and their primary source of transportation. But for many welfare recipients and low-income families, a car can mean the difference between employment and the welfare line-especially if public transit is limited. As states try to move welfare recipients to work, transportation problems often surface as a primary barrier to employment. Public transit offers limited access to suburban job sites, child care and schools, forcing recipients and low-income workers to seek alternative ways of getting around.

One approach is to provide recipients with cars. States and localities have tried various ways to connect recipients with cars, including donating or selling used and surplus vehicles or providing low-interest car loans. Some programs provide assistance to repair existing vehicles.

Vehicle donation programs solicit vehicles from dealers or individuals in exchange for a tax credit. Vehicles are then inspected and repaired, often through agreements with mechanics that service government vehicles or by mechanics who donate time. Usually, applicants for cars must demonstrate a need, be employed or in compliance with a self-sufficiency plan, insurable and must have drivers licenses.

Many vehicle ownership programs are operated by nonprofits that provide cars to people who have been referred by local state agencies. Programs in Texas, Maryland and Colorado operate in coordination with nonprofits that run the donation programs. Virginia and Ohio allow the state to purchase and resell surplus government vehicles. Programs working through nonprofits can use donations as an in-kind match for the Welfare-to-Work program. Money spent on transportation services for eligible families can also count toward meeting a state's required maintenance of effort under the Temporary Assistance to Needy Families (TANF) program.

The agency or nonprofit usually retains a lien on the vehicle for a period of time that allows the individual to satisfy terms of the lien, like repayment, staying employed or staying off welfare for the duration of the lien. The Wheels-for-Work program in Texas requires individuals to satisfy their liens by providing payment in cash, performing community service or combination of both.

Most programs offer assistance with license, title and insurance costs, in addition to routine maintenance. Charity Cars in Florida and Wheels-for-Work in Texas work with clients to secure funding to pay up-front costs such as insurance and licensing. Charity Cars will even provide a membership in AAA, and can repossess the car if recipients fail to keep the vehicle properly maintained. In Virginia, the cost of regular maintenance and tires is included in the monthly repayment, which averages between $80 and $100. Other programs such as Project Self-Sufficiency in Colorado have agreements with city and county mechanics that provide free or low-cost maintenance to individuals who receive cars. The 20/20 program in New York trains recipients as mechanics and then allows them to purchase cars that they have helped re-condition.

The cost of maintaining a car can be a major drawback for some low-income families. But for many families, owning a car can be a pathway to employment, a better job and a better way of life.

Estimated Cost of Owning a Vehicle*
Location	Annual Vehicle Registration	Vehicle License Fees	Average Cost of Liability Insurance**	Annual Maintenance and Tire Cost Based on Cents/Mile***	Total Annual Cost	As a Percent of Annual Income Based on $6/hour 30hs/week
Phoenix, Arizona	$37	$149	$507	$630	$1,323	14
Los Angeles, California	$37	$143	$496	$630	$1,306	13
Denver, Colorado	$21	$89	$476	$630	$1,216	13
Atlanta, Georgia	$20	$183	$309	$630	$1,142	12
Indianapolis, Indiana	$65	$82	$324	$630	$1,101	11
Boston, Massachusetts	$15	$30	$721	$630	$1,396	14
Philadelphia, Pennsylvania	$36	None	$447	$630	$1,113	11
Sioux Falls, South Dakota	$38	None	$231	$630	$899	9
Seattle, Washington	$61	$94	$460	$630	$1,345	14

*On-Going Vehicle Fees: A Comparison Among the Most Populous Cities of Each State, California Research Bureau, California State Library. January 1997. Figures based on estimates for a 1993 Honda Civic CX.

**State Average Expenditures & Premiums for Personal Automobile Insurance in 1994, National Association of Insurance Commissioners. January 1996.

***Based on calculation of 4.2 cents/mile, annual mileage of 15,000. Rates based on information provided by the American Automobile Manufacturers Association

Wisconsin and Michigan take a different approach and provide low-interest loans to qualifying individuals ho can then purchase their own vehicles or fix the ones they have. The loans serve a dual purpose by helping people not only own a car but get a chance to establish or re-establish credit.

Donated cars are usually between 5 and 10 years old with high mileage. Programs are careful to screen cars before accepting them. State laws allow agencies and organizations to avoid liability for any accidents or problems associated with donated cars, as only the title holder is legally responsible. To protect the donating agencies further, recipients are usually asked to sign a waiver or acknowledgement that states they are aware that the organization or agency is not responsible for the car after the recipient takes title.

Owning a car will not be feasible for everyone. Some have poor driving records, revoked or suspended licenses, which substantially increases insurance costs. Still others will not be able to afford insurance, maintenance, and licensing without assistance from programs that helped get them cars. In addition, the cost of commuting may not be affordable for those who face long distance commutes or who must pay daily parking charges. It is not clear that the benefit of owning a car will be an affordable option.

Owning a car can remove a lot of barriers, and it is a solution for some of those with immediate transportation needs. As states try and develop better public transit systems, expand existing routes and coordinate services, there continue to be service gaps that leave many low-income workers unable to use public transit as their main source of transportation.

All recipients and low-income families will not own cars, but the more accessible reliable transportation is to these families, greater chance they will have to be self-sufficient. States will need to maximize the use of all forms of transportation-cars and transit-in order to make the ride from welfare to work successful.

Selected References:

Dana Reichert. "Getting to Work: Providing Transportation in a Work Based System," Meeting the Challenge of Welfare Reform: Programs With Promise, Denver: National Conference of State Legislatures, 1998.

"Cars for the Working Poor,' Innovation Briefs. Washington, D.C.: Urban Mobility Corporation, 9, no 1 and 2 Jan/Feb and Mar/Apr 1998.

For more information on vehicle ownership programs, contact Jack Tweedie at NCSL-Denver at 303-830-2200.

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