Lose Your Job, Keep Your Stuff
by Heather Koerner on 03/31/2009 at 11:51 AM
The first time I heard about it was this weekend. I was doing a little research for summer vacation plans and saw it: "Sign your child up for summer camp now! If you lose your job, we'll provide a scholarship to cover the cost!"
Then, this morning I saw a quick clip about it on the news: "Go ahead and buy that new car! If you lose your job, they'll cover your payments!"
So, I've been introduced to the new way to boost sales in a slacking economy: Job Loss Protection.
Seems, it may have started with Hyundai, who first offered customers the right to return their cars to the dealership -- no questions, no repercussions -- if the customers lost their income. They then upped the ante, offering customers who lose their jobs "payment relief" for 3 months (nice for transportation while looking for another job) and then the "return with no strings" if things don't work out.
Now, not only are GM and Ford following suit (sort of), but even some home builders and mortgage companies are getting in on the "Job Loss Protection" action.
Seems consumers may be biting, because Hyundai was one of the only automakers to report a sales increase in January.
"We were looking at what would get people off the fence," said Jeff Cook, president and chief operating officer of a company offering this protection on condos. "It's thinking outside the box."
It certainly is outside the box and kudos to these marketing guys for reading the pulse of consumers so well. But I couldn't help but wonder if a little healthy fear and a little healthy pause (even, maybe, a large healthy pause) before making large purchases like autos and homes is still a good thing.
Maybe a little more fence sitting is exactly what more of us need.
Because, after all, the Bible makes two things perfectly clear about debt. First, the borrower is a slave. Second, you will pay back what you borrow. Lessons to us? First, I want to be extraordinarily careful before willingly placing myself into a situation the Bible describes as bondage. Second, I'm going to make mighty sure that even when the potholes of life come, I can still pay the debt back.
That might take a lot of forms. For my husband and I, we work intentionally to be debt free. We only take out debt on appreciating assets (sadly, Hyundais don't qualify) and, even then, only with a generous margin of safety for emergency situations, crazy real estate markets and acts of God. We keep an "emergency fund" of three to six months of income.
We routinely run "financial fire drills" asking ourselves: What happens if he loses his job or I get really sick or our real estate market tanks? Are we covered? How long can we make it? Do we have some wiggle room? Or, would we be in trouble the first month because our car payment was due and we didn't have the money to cover it?
These "Job Loss Protection" programs are inventive. And they may get some to jump off the fence. But my advice? Just keep sitting for a while. Do your own fire drill. If you are just a couple of months of unemployment away from financial ruin, maybe it's time to put the car ads down and kick the saving up.
1. Victoria said the following at 12:14 PM on Mar 31:
I always enjoy your articles, Heather. I particularly liked your 'financial fire drills'! What a good example of Godly stewardship, and such a contrast to Christians who stumble haphazardly into financial decisions, all the while claiming that "don't worry, God will provide". Um, that is presumptuous -- God gave us wisdom for a purpose, that we may make good decisions for His glory.
2. DannieA said the following at 12:22 PM on Mar 31:
as a single person it's harder to save faster for 6 mo. of income, but I have made it to three in my savings account and I have another savings account for rainy day emergencies of the moment...
but sitting on the fence is good...yeah do I not buy impulsively as I used to...of course, but it's better that way.
3. Adam said the following at 12:55 PM on Mar 31:
"But my advice? Just keep sitting for a while. Do your own fire drill. If you are just a couple of months of unemployment away from financial ruin, maybe it's time to put the car ads down and kick the saving up."
Would the Watters care to comment on "starting a family" when not financially secure?
4. J. said the following at 1:25 PM on Mar 31:
Heather, I think the companies you mention are on the right track in terms of being charitable (though they obviously want to make money off their generosity, too), but I agree that people shouldn't jump to buy the products unless they can truly afford them.
Also, Heather, I'm curious. Does your not going into debt for a vehicle mean that you lease cars instead, or that you buy older, cheaper used ones? The latter is often not practical for single women because their personal safety has to be a bigger consideration (i.e., they don't want to drive beaters that break down when they're driving alone at night). Leasing tends to be less financially prudent than buying because people who consistently choose this option always have car payments.
In addition, we can't always count on our homes' being appreciating assets when we go into debt to buy them, as recent events prove.
5. Keith said the following at 1:43 PM on Mar 31:
I think we need more of what Hyundai is doing, especially in the mortgage market. Think about it: If a person has been a hard worker and always paid thier bills on time, and then they lose thier job, should we demand that they be forced to keep making the same payments, even though thier circumstances have changed? Why can't mortgages be more flexible, allowing people to pay more when they can (ie. an incentive to work hard to shorten the mortgage) and to pay less when they fall on hard times? It creates more stability and keep the economy going, even in times of uncertainty.
Of course saving money is important. But if big companies can do something to also help consumers out, I can't see how that is a bad thing.
6. Steve Watters said the following at 1:59 PM on Mar 31:
Adam:
When you're not financially secure, you have to be more careful and informed about a lot of decisions. To that end, it's easy to think starting a family isn't much different from taking on any kind of long-term expense (such as a car or a home), but we have to be careful not to view having children from a sheer number crunching perspective. There are so many other dimensions we have to keep in mind.
Our encouragement for couples during this tough economic time is to pray that God will help them to number their days aright and help them be good stewards of the provisions He gives them. While He may encourage some couples to not "build a tower without counting the cost" (Luke 14:28), He might prompt others to have children in what seems like impossible circumstances with the vision of having no ordinary child (Acts 7:19-20) who can bring relief from the problems they are born into.
7. Heather Koerner said the following at 2:53 PM on Mar 31:
J. (#4):
I "Drive">http://www.boundless.org/2005/articles/a0001875.cfm">"Drive Old Cars".
I understand your concerns about safety. In the past, I've considered upgrading my 11-year-old vehicle because I have two small children and was afraid of being stranded with them. Then, one day, I was stranded with them ... about 50 miles from my hubbie. I simply thanked God for my cell phone, called hubbie, passed out the snacks and sang songs for an hour until he got there.
A single woman does need to be cautious about where she is going and when, but I think there are better solutions than going into debt for a new car.
You said: In addition, we can't always count on our homes' being appreciating assets when we go into debt to buy them, as recent events prove.
Very true!
8. Al said the following at 3:30 PM on Mar 31:
Steve (#6),
Thanks so much for presenting both possibilities for Christian families working out the tension between faith and stewardship.
9. DannieA said the following at 3:36 PM on Mar 31:
Heather said:
"A single woman does need to be cautious about where she is going and when, but I think there are better solutions than going into debt for a new car"
such as????
there are smarter ways to go into debt....such as not buying a new BMW...but buying a reliable Toyota without the upgrade packaging and either a) buy it cash or b) putting such a large downpayment on it and paying it off within the year.
10. Michael Hamblin said the following at 3:37 PM on Mar 31:
Heather - If you listen to stories of modern day slavery, often the stories of people start out as being in financial straights, and by chance meeting someone who would loan them money to solve their immediate need, and then being tricked into a situation where they could never repay the debt.
Steve - I agree that having children should be considered separately from economic circumstances. People think having a baby is a huge economic burden, but what I've learned recently is that most of the things people spend money on young children for often aren't necessary. It is very possible to care for an infant without incurring a significant financial burden if you don't fall for the trap of believing you have to buy every baby product on the market.
11. Leeandra said the following at 4:31 PM on Mar 31:
Here's the thing, though--car salesmen (and women) and auto workers ALSO have to feed their families. They are really feeling the effects of the economic downturn.
A lot of people, even people who've made sensible financial decisions, whose homes aren't in any danger of foreclosure, who have jobs and healthcare, are nevertheless absolutely PANICKING and refusing to spend any money that isn't absolutely necessary. This means that manufacturing and sales jobs are cut back, which means there's less discretionary spending, which means more cutbacks...you get the picture. A real snowball effect.
A Hyundai is, to the best of my knowledge, generally NOT a tricked-out luxury automobile (though I'm sure higher-end models are available). The majority of ones I see on the roads are pretty modest family cars.
I grew up with old cars that we drove until they wouldn't go anymore. (One car, which we affectionately named, well, a name that rhymes with "Chitty Chitty Bang Bang" but which isn't appropriate to spell out on this blog, we ended up selling to the junkyard for spare parts for $35. We don't know where they would have found $35 worth of parts on it.)
I have been stranded by my family's cars more times than I can count--in town, on country roads, in the heat of summer, in the dead of winter, at high noon, in the middle of the night, on my way to work, on my way home from a friend's wedding, in the middle of a tornado warning area.
It is not an experience I would want to repeat with small children in tow. A car that does not leave its driver stranded on a regular basis is hardly a luxury purchase in car-dependent America.
12. Kate said the following at 5:10 PM on Mar 31:
DannieA #9:
I agree with you in that there are "better" ways of buying a new car than others, like you have described. And if you really can afford to buy a new car and it's what you want to do with all that money, ok.
As for ways of making it "safe" for single women traveling alone, you can invest in good roadside assistance coverage and always carry a mobile phone. I frankly can't see how having a new car rather than an older one would bring more security than this. Also, you can learn more about how cars work so you can keep up on your maintenance and learn to spot signs of a problem before it would result in a complete breakdown. (Yes I realize it is a lot of effort to learn that much about cars and it can be hard to find somebody to teach you).
But let's evaluate it. How much of a guarantee are new cars anyway? Do they really provide a significantly higher level of "security" for a single woman traveling alone than used cars would, especially with the price? Let's look at what causes people to get stuck on the side of the road.
New cars can come with defective parts, and you could have one go wrong before the recall is issued. Like any used car they can also run out of gas, get into accidents, hit deer or skid on ice (can you tell I'm from MI?). Their tires could go flat or blow out just as easily as up-to-date tires on an older car.
In fact, although this is anecdotal, I live in one of the worst off cities in the country where people drive horrible wrecks of old cars all the time (Detroit) and I see more people stopped on the side of the road/in ditches from skidding out, hitting or trying to avoid deer/other vehicles, ran out of gas, and blown out tires than I see stuck on the side of the road for reasons you can't see while passing by, which would be things I suppose people think of as the lurking dangers in used cars. I have only ever seen one car pull over due to overheating in all of my commuting, and that was even a new looking car and it was during the day in a traffic jam and driven by a male though this wouldn't be much of a vulnerable situation anyway. (I remember it because I was so surprised to see such a new car overheating, especially since I never see that).
Honestly, I have not been worried about having a breakdown in my high mileage used car, though I am a young woman and drive in some of the highest crime cities in the country. What I worry about is accidents since I am usually surrounded by terribly impulsive drivers who tend to be on their cell phones. I suppose it would be interesting to see some actual stats about what the most common causes of getting stuck on the side of the road are.
13. Kelly said the following at 7:50 PM on Mar 31:
The verse that debt makes you a slave really struck a chord with me.
So many people have mortgages. So many people are therefore slaves to the bank.
In Biblical times, was there such a thing? Or did the average person live in a humble house with several generations of family, with the idea of owning 'your own home' something restricted to only the very rich?
I paid off my mortgage this month. Oh what a RELIEF it has been, to know that I no longer am a slave to the bank. It feels like a huge weight has been lifted from my shoulders.
And this blog entry has reminded me that through God's grace, I am so very rich, to own a house.
14. Kelly said the following at 7:52 PM on Mar 31:
(A post-script: I'm so anti-debt that my car is 15 years old and falling apart and I have no furniture. I've chosen to pay off a mortgage rather than buy stuff.)
15. BDB said the following at 9:21 PM on Mar 31:
Of course, in keeping with the article's title, if you have the money set aside, there are lots of discounts on cars now, and if you can pay up front, you can get more car for your money.
If you lose your job, you keep your stuff, because it's paid for.
16. Jo said the following at 1:50 AM on Apr 1:
The OP said:
"We keep an "emergency fund" of three to six months of income."
When my Dad was made redundant, it took him 9 months to find a new job. And that was when the economy was great.
People should definitely have an emergency fund - but as Leeandra said, in this climate that doesn't put people at ease. So Hyundai have probably got the right idea. :)
Another question is this 'to buy a new car or to buy an old car' thing. This mentality of 'an old car will break down' is sort of foreign to me, because it's very common among the people I know to buy used cars rather than new, even if you can afford a new one. Most new cars lose so much of their value in the first 1-2 years that it's pretty crazy to buy new, in my opinion. My Mum and my brother both have cars that are about 4 years old and still as good as new, and my own car is 12 years old and apart from small repairs every now and then, it's fine. Of course if I had more money a newer car would be nice, but I would still buy second-hand.
Anyway, my old car broke down once and it really wasn't that big a deal. :/ So I guess I'm with Heather on this one.
17. DanL said the following at 8:05 AM on Apr 1:
Where do we get the idea that a car has to be new to be reliable? My 94 Accord has 204k miles on it and has never once left me stranded. I’ve put the last 112k of those on in the last seven years and have only had it in the shop three times (timing belt change, exhaust leak, brake master cylinder). In fairness I have performed more minor work in house. A good friend has over 260k miles on her Tercel and it has never left her stranded either. I think I can make the case that my trusty car which has proven itself is more reliable than a new car off a lot which may or may not be a lemon.
18. J. said the following at 9:49 AM on Apr 1:
Kate (#12), I agree that cell phones and roadside assistance are good things to have in case of an emergency, but I'd rather have a newer car that is less likely to break down in the first place. Cell phone signals are not guaranteed, and help requested via a roadside assistance program can take awhile to arrive sometimes.
One reason I recently bought a new car was that I wanted the electronic stability program feature and lots of airbags -- things that are not found in old cars. (I could have bought a used '08 model with those features, but I chose to buy a new car with 0% financing instead.) Preventing accidents in the first place or lessening the possibility of serious injury for me and my passengers is important to me and worth spending money on.
19. DannieA said the following at 12:46 PM on Apr 1:
re: Kate,
actually i know a little about cars, my dad sells them, and he maintains the little things for me and I only go in for bigger maintenance. And road assisstance is crucial, as well as a cell phone, but people disappear in less time than when help arrives sometimes...so I try to avoid getting stranded....and to me running out of gas is something that is your own fault...you never EVER go out with less than half a tank! We're not talking about common sense issues...
I do think that if one lives in extreme weather you have to examine what you drive, tires, etc. because the cold/snow affects cars differently than us down in so Cal.
I follow larry burkett where he says one should only have two payments to make....mortgage and car. Because you need shelter, and you need transportation. Depending on what budgeting system you follow (assuming it's Christian based...there are some differences)
re: diminishing price worth of new cars after 1-2 years....depending on if you buy cash your car and the car model...you may not lose that much money, some cars do not depreciate as fast as others. (e.g. Honda)
Dan L....112K miles in 7 years??? must be nice...I'll be lucky to keep it under that after 4 years.
20. Heather Koerner said the following at 1:09 PM on Apr 1:
Kelly (13): Congrats! What an accomplishment!
21. Mike Theemling said the following at 2:09 AM on Apr 2:
"Second, you will pay back what you borrow."
Unless you happen to be AIG, GM, or one of those other companies who got bailed out by the government.
But yes, good advice nonetheless.
22. Kellie said the following at 9:04 AM on Apr 2:
I read a lot about having 3-6 months of income saved up. I do like to have some money in savings, but we never seem to get more than 2 months before something happens and we need to use.
For all that is said about cars...depending on where you live a car is vital. For me and my occupation I drive throughout the day, so a good car is necessary. We recently bought a slighly used car (our 2nd car is 10 years old) and don't regret it. But we did make sure it was within our means.
23. Kelly said the following at 6:20 PM on Apr 2:
Thanks, Heather! :)