We’ll Take Your Car Back If You Lose Your Job

by Kevin on May 4, 2009

The Big Three manufacturers are in trouble. Their suppliers are in trouble. America, allegedly, is in trouble. Bankruptcy is in the air. Union contracts are up in the air…

The auto manufacturing industry is in absolute chaos.

But wait, we’re still here to provide you with vehicles that meet your families needs! Even if you can’t afford it!

I’m sure most of you reading this have seen the commercials from Ford, Hyundai, and GM are offering various versions of the same idea: if you lose your job, we’ll either take back the car or make your payments for you.

This sounds absolutely fantastic. Right?

Buyer’s Assurance Programs are Marketing Gimmicks

Before I get started let me say that these programs may end up helping buyers out there. I’ll also say at the same time that they are still marketing gimmicks — good marketing, no doubt — but marketing nonetheless.

Here’s what’s being offered:

Hyundai: We’ll Take the Car Back if You Lose Your Job

Hyundai’s marketing pitch essentially says buy a car from us because if you lose your job you can bring the car back, no questions asked. If you lose your job they will make your payments for three months in hopes that you get back on your feet. If not, they’ll take the car back with no penalty. This sounds like a good deal and I suppose it is because it would prevent a repossession (which damages your credit).

But, wait a second. If they take back the car, you don’t have a transportation any longer. Your down payment and your past payments? They are all gone, too. Most likely you are not only out a ton of money you now don’t have any means for getting around (to say a job interview, or a job if you landed it after an interview).

Ford: We’ll Make Your Payments for 12 Months

On my of Ford’s models they will offer to make your payment (up to $700) for you for up to 12 months if you lose you job. The catch: you have to have been employed for at least 90 days before you lost your job, and you must be unemployed for 30 consecutive days. Oh, and the plan only applies to vehicles purchased between March 31, 2009 and June 1, 2009.

GM: We’ll Make Your Payments for 9 Months

GM’s plan is very similar to Ford’s except it last 9 months and the maximum payment is $500. The car must be purchased in April which means if you are reading this and considering buying a GM to get this plan, it’s too late.

The Bottom Line

Here’s my stance on all of this. If you need your car manufacturer to bail you out of your car payment then you shouldn’t have bought the car in the first place. You either didn’t put any money down or don’t have adequate savings.

On top of that who has a car payment of $700? That seems extraordinarily high to me. I could understand if you worked in the oil/gas or construction industries and you bought a 4×4 truck with all the goodies on it… that might get you to $700 per month.

But the average person? Seriously? $700 is a rent check in most areas of the country. Unless you’re living in your car that’s just insane.

{ 15 comments }

Nate @ Debt-free Scholar May 4, 2009 at 6:49 am

I cannot believe how expensive car payments are these days! One more reason to ride a bike. 🙂

Thanks,
Nate

MK May 4, 2009 at 8:30 am

$500 even seems high. If these people were getting the bare minimum vehicle their payment shouldn’t be anywhere near 500-700 dollars. But of course, people can’t live with out all the little luxuries in vehicles that they could never afford!

Spot on about this being a marketing gimmic. I wonder how many people neglected to read the fine print….

Cathy May 4, 2009 at 11:17 am

I agree with you. If I lose my job and can’t afford the car, then I won’t buy the car to begin with. Which is exactly the situation I’m in right now. I’d like to replace my Jeep with a smaller, more fuel efficient car, but I can’t do it right now without being upside down on the payments. That’s not a position I want to be in, and the car companies offering to make my payments isn’t going to entice me otherwise. Dropping the price, on the other hand….

Finance Nerd May 4, 2009 at 12:08 pm

My employer insures the Hyundai program, and frankly that program scares me. Part of the pricing assumption for the insurance is just what you walked through — otherwise eligible people won’t return their cars because then they have no car.

If this is true, we should be in good shape, but if it’s not, we may get a lot of claims.

MLR May 4, 2009 at 12:28 pm

I haven’t read the programs, so perhaps this is a silly question.

Is there any required loan term? Could I go in, get a $24,000 car, finance it for 3 years and have Ford pay for the first year?

Assumptions:
$24,000 car
$2,000 down
No trade in
6% sales tax
5% interest rate
36 months

Monthly payment: $702.51

Mike @ TheThriftyLife May 4, 2009 at 1:20 pm

So, paying for 3, 9 or 12 months of my car bill if I lose my job is a good thing. Offering that for free is also a good thing.

So if I lose my job here are my options after the 3, 9 or 12 months are up and I don’t have the money to keep making my payments.
Either 1. The loan company repossesses my car. I’m out a car. And I have bad credit.
Or 2. The dealer takes it back. I’m out a car. And I still have my credit in tact.

This isn’t about being without a car, it’s about not destroying your credit because you came upon hard times. That’s what they’re ultimately offering you – a buffer of time to find a new job or a get out of jail free card.

@MLR – You would have to 1. Have a job when you bought the car and 2. Lose your job during the first year or whatever Ford’s terms are. Then you could collect from Ford for a year, or until you got a job. If you can arrange that – well at this point, you’re talking about committing fraud, so either way you can’t take advantage of the program unless it happens to you without your prior knowledge.

MLR May 4, 2009 at 1:41 pm

Mike —

I think I was confusing this with a deal a local Hyundai dealership is doing where they will either give you 30% off of the car or make your first 12 monthly payments.

Woops, good point. Just a little mix up on my part! Thanks for clearing it up!

MLR

Scott May 4, 2009 at 6:39 pm

Kind of reminds me of the deals that were advertised last summer for new car buyers (gas was over $4.00/gallon at the time)….buy a car now and get gas for the next 3 years for only $2.95/gallon!

I bet those people are kicking themselves now that gas is currently hovering at $1.75 – $1.85/gallon.

These are all gimmicks!

Kevin May 4, 2009 at 9:00 pm

@Nate: See that’s the thing. They don’t have to be that high. You could pay cash…

@MK: Thanks for stopping by.

@Cathy: Stick to your guns! Pay cash if at all possible. We’re currently on that plan and it’s going splendid.

@Finance Nerd: Gulp!

@Mike: I see your point. Yes, it is to avoid a repossession on your credit. But you shouldn’t be buying things when you think you might risk a repossession. If you’re that scared about losing your job, go buy a clunker until your job security and/or financial situation improves.

On top of that the car company gets to keep the car and the money in the end. It isn’t like they’re refunding you what you put down as a deposit, all of your payments, etc. They get the car, the money, and then get to re-sell the car. Win, win, win for the car company.

@Scott: I hadn’t thought of that, but you’re right.

Mike @ TheThriftyLife May 4, 2009 at 9:23 pm

@Kevin – I’m not advocating buying a car if you can’t make the payments, but the coverage includes more than just “if you lose your job”. If you read the fine print on the Hyundai coverage is includes

• Involuntary unemployment
• Physical disability
• Loss of driver’s license due to medical impairment
• International employment transfer
• Self-employed personal bankruptcy
• Accidental death

That offers some nice backup insurance in case any of those things go wrong. Here’s the key – This is a marketing incentive to get people to ARE going to buy a car to make it a Hyundai, Ford, or GM. Not to convince those who can’t afford it to give this a shot.

Also you have to remember, the car dealer doesn’t just get your car back. You bought it from them and your lienholder paid the full value for the car. That sale is complete. They don’t get anything more than the purchase price of the car.

When this kicks in, they essentially have to buy it back from the lien-holder. For most of these the car maker’s own financing program is the one offering this option, so the money is switching hands internally, but there’s no double win for anyone.

Yes you lose your deposit and what you paid, but that’s the point. You’re losing the whole car, it’s being repossessed unless you find someone to buy you out of your loan. So, like anyone in that situation you always have the option to find another buyer to protect your credit, so you can pay off your loan. In this case, the car dealership is doing exactly that – paying off your loan and purchasing the car. Plus, they now have another used car in their inventory. So that’s another car that they need to sell to realize the full value of the sale.

Tad May 5, 2009 at 1:58 am

I think it is a great idea. I knew I was loosing my job and so did the dealer. I bought a $12,000 car, no down money down,$200 a month I pay on it for 3 months put as many miles as possible they pay 3 months. I get a new car for $100 a month and can drive it as much as I want.I think it is a gret deal

Finance Nerd May 5, 2009 at 3:38 am

Mike, you are right, in the event of a claim the insurer pays off the lienholder, but only for the deficiency balance — in other words you have to be upside down. For example, car worth $10K, loans of $12K, insurer pays $2K.

Also worth noting, that at least for the Hyundai program, you do NOT have to use Hyundai financing to qualify.

TStrump May 5, 2009 at 10:47 pm

It’s crazy some of the car payments that people have.
If they need these marketing plans to ensure they can afford the car, they clearly can’t afford the car.
They should go on Craigslist and buy a used car – I did and found a great deal and will be driving it until it no longer runs.

Bible Money Matters May 6, 2009 at 8:20 am

Just save up and pay cash for your next car, and you won’t have to worry about payments. That’s what we did! Then start paying yourself payments again now that you have a paid off car, and in 2-3 years you have enough for another new/used car.

Kevin May 6, 2009 at 8:44 am

I agree with Bible Money Matters. Simply pay cash and you won’t have to worry about this stuff. Same thing with TStrump’s comment. I bought my car used for $4,000 under what a dealer wanted to charge me for a significantly poorer model of the same car.

Used + Cash = win

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