Scotty Colson helps run a residential program for recovering alcoholics in Birmingham. They spend several months getting sober, working on life skills, getting a job, and setting out on their own. Having wheels of their own helps that independence, so the charity, Jimmie Hale Mission, has an in-house mechanic who fixes up donated cars to give to graduates.
In years past, people would readily donate old cars to the program. Now, with the high cost of used cars, supply has nearly completely dried up.
“When they finish our program, they are free from, they know how to deal with their addiction, and they are working to be free, to have more options, and the transportation gives them more options,” said Colson.
According to a report by CoPilot, a car shopping app, as of last June, average used car prices were up to an all-time high of $33,341, that’s $10,046 above normal levels. It represents a whooping 43 percent rise.
Although the price of used cars began to drop last month after rising thousands of dollars above normal prices, auto loan delinquencies reached their highest point in the last decade, according to TransUnion, a consumer credit reporting agency.
Ted Black, general manager at Holmes Motors, a used car dealer in Birmingham, said it’s a lot harder to find used cars than it was before the pandemic. Now his dealership must compete with out-of-state dealers vying for cars at local auctions. His prices have gone up, and so have his customers’.
“You have a lot of them that say ‘oh my god,’ the prices are so high. It’s one of those unfortunate things. If we pay more, we have to pass that on to the customers and they have to pay more as well.”
Last weekend, a Jimmie Hale gifted a graduate an older 2003 maroon Chevy Malibu sedan. It was the first car the program had to give away in over a year. Colson thinks that people who would have otherwise donated their old clunkers, discovered during the pandemic that used cars, once worth about $3,000 after repairs, were now worth closer to $5,000 if they resold them, due to the car chip supply shortages during the pandemic that drove down the stock of used cars in the U.S.
The high cost of buying a car has hit Alabamians who work low-paying jobs the hardest.
“I’ve been rejecting more (customers) in the past six, eight, months than I have in the past four years that I’ve been here,” said Black, whose dealership offers in-house financing to people with poor credit.
Lauren Tancock, 34, works in the scholarship office at UAB. Her husband works in IT and is studying for a graduate degree. In 2021, a tornado destroyed their homes and two cars in Fultondale. They had a toddler at home and needed to replace their vehicles quickly, but the timing was unlucky for them.
Holmes Motors in Birmingham
In 2020 Tancock purchased a used Black, 2019 Nissan Rogue for $13,000. After the tornado, she wanted to replace it but couldn’t find many options.
“We ended up going to like four or five dealerships and seeing that the same car I had, which was now older, right, cause we’re talking like nine months later, and had more miles on it, (and) was upwards of like $18,000, $19,000.”
Her husband had a similar experience and could not to purchase the same amenities that he had enjoyed in the car that got destroyed. He ended up settling on a used vehicle that now has become a money pit, said Tancock. It has problems with its exhaust, brakes and more.
Molly Britain is a social worker at ELI Thrive, a social services group that helps people in the Eastlake neighborhood of Birmingham work on their budgeting skills. She said that, as the used car market became tighter, her clients were subjected to more predatory lending, as they were forced to pay higher and higher interest rates and sale prices for cars. Buyers have little negotiating power, especially if their credit is bad.
“I have clients with $700 monthly payments for a KIA Soul, because it’s the only thing available and their credit is typically not in great condition when they first get here,” she said.
At Jimmie Hale, many residents are able to get good jobs at Mercedes or Tyson, said Colson. Those companies have locations far out of town, and they offer shuttles, for a fee, to help employees get to work. At other jobs where a shuttle isn’t an option, not being able to afford a car creates a domino effect.
“When they say, ‘We’re putting you on night shift, then you’ve got a transportation problem. If you can’t get to the job, then you lose the job. If you lose your job, you lose your housing. If you lose your housing, you’re getting back to where you were when you came to us,” Colson said.
The Eastlake residents Britain works with usually have jobs in fast food or at gas stations. Their work is far from where they live and not very accessible by bus. She said one woman spent two hours taking the bus to work at Whole Foods. If she had been able to drive it would have taken 15 minutes.
“If they don’t have a car, they can’t get to work. If they can’t get to work, then nothing gets paid, so the trade-off seems worth it to them,” she said about paying high prices for used cars.
The Tancocks, who lost all of their furniture in the Fultondale tornado and were scrambling to find housing, paid so much for the down payments on their cars, it made it harder for them to get a mortgage to replace their home, especially with the shortages in the housing market happening at the same time. They eventually purchased a home in Gardendale, paying more for it than they had intended.
“We’re still excessively frustrated,” said Tancock.
Tancock’s husband is finishing his degree, and they are considering moving, depending on job opportunities. She worries that they paid more for their home and cars than they can sell them for, and that may hold them back from leaving.
“We’re very concerned about resale value of everything, especially since the economy seems to be just closing in on itself.”
Update this story was updated at 11:51 a.m. November 14, 2022
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