In the Driver’s Seat

Social-service charity’s car dealership aims to put its clients on the road to a brighter future

As used-car dealerships go, Ideal Auto — located here in this rural town near the western edge of

the state — is more than a little low-key. No strings of multicolored pennants hang here, or gaudy signs screaming “Super Sale!” or “Manager’s Special!” Glad-handing salesmen anxious to sell a secondhand “cream puff” are not out pacing the lot. And don’t look for any flashy sports cars or tricked-out trucks, either.

Instead, the dealership’s inventory of modest, economy cars — about 20 vehicles in all — is quietly lined up before a drab, corrugated metal building that doubles as office and garage.

Ideal Auto bills itself as a “socially conscious car dealer.” While used-car companies have a reputation for hype and hucksterism, Ideal Auto is in the business of providing help and hope. It is run by a nonprofit group whose main goal is to help people with low incomes purchase the reliable cars they need to get on the road to a better life.

“We sort of backed into the business,” says Peter Kilde, executive director of the West Central Wisconsin Community Action Agency (West CAP for short), the human-services charity behind Ideal Auto. “We set up the dealership primarily to get access to the cars our clients wanted and to make sure that they weren’t paying too much for them.”

Cars, Not Dollars

The venture has yet to turn a profit, though Mr. Kilde is optimistic that it will soon be financially self-sufficient.

The dealership operates as a component of a comprehensive car-buying program the charity offers called JumpStart, which is aimed at needy families and includes credit counseling and down-payment assistance. The program also helps people line up auto loans and put aside money for car maintenance and repairs.

The charity measures Ideal Auto’s success not in dollars brought in, but in cars driven off the lot by people who might not otherwise have ever gotten behind a wheel.

“In six years of running the program we’ve put 237 people into cars that are part of a very low-income, high-risk population, and yet there’s only been 17 repossessions,” Mr. Kilde says.

The charity estimates it has collectively saved its clients more than $250,000 over what traditional dealers might have charged for the cars. What’s more, client follow-up surveys by the charity show that a majority of JumpStart participants have used their affordable wheels to land better jobs or housing while reducing their need for welfare or other government assistance.

Angelina Velazquez, a single mother who three years ago bought a blue 2001 Chevrolet Impala at Ideal Auto, calls the program a “godsend.”

“I had filed for bankruptcy during a previous marriage, and my credit was shot,” Ms. Velazquez says. “I could not get a car for the life of me. But they are not just salespeople, they help you. I was so thankful to be given a second start because I had a small child and was trying to get my life in order.”

Since buying her car, Ms. Velazquez says she has started a small day-care business and is increasingly able to volunteer at her daughter’s school and Girl Scout troop.

“It’s been a blessing for me,” she says of her affordable wheels.

Government Money

West CAP, which is financed largely through federal block grants, including money that comes through the federal Temporary Assistance for Needy Families program, runs a variety of social programs and services: It provides low-cost housing, job training, food pantries, and soup kitchens.

JumpStart’s roots go back more than a decade when West CAP and other area charities began to more carefully examine the region’s poverty and discovered the key role that reliable transportation plays in both employment and tending to a family’s diverse needs. No public-transit system serves the seven counties where the charity operates, and employers, schools, stores, and health-care facilities are scattered among rolling hills and sprawling dairy farms.

With help from a grant from the Otto Bremer Foundation, in St. Paul, Mr. Kilde says, the charity experimented with ways to overcome the mobility challenges poor families face, including setting up van pools, organizing people to volunteer as drivers, and establishing a loan program to help people pay for costly car repairs.

“We tried all kinds of stuff, and nothing really worked,” Mr. Kilde says.

In 2000, the charity ultimately “crunched the numbers” and concluded that helping low-income families acquire their own two- or three-year-old economy car was the most practical and comprehensive approach — and JumpStart was born.

Initially the charity sought cars for its clients at commercial used-car lots and through private sellers. But this proved costly and problematic.

“Our involvement with other dealerships was frankly disappointing,” Mr. Kilde says. “We were not getting the deals we were trying to get.”

Individual sellers, meanwhile, offered cars for less money, but they often sold before West CAP could line up a JumpStart client and begin the purchase process.

Frustration as much as anything led the charity to the idea of becoming a dealer. “We thought it would work a lot better and discovered that they are not too hard set up,” Mr. Kilde says.

Dealer-licensing regulations vary from state to state. Among the requirements in Wisconsin, dealers must have a permanent business location in a commercially zoned area, a $50,000 surety bond, and either an in-house auto-repair facility or a contract with a nearby auto mechanic. The license costs $40 every two years.

Access to Auctions

Perhaps the single biggest benefit the charity has gained in setting up its own dealership is access to the large wholesale auto auctions that are open only to licensed car dealers. Millions of vehicles are sold at such auctions around the country each year, including cars returned at the end of a lease, retired rental cars, and dealer trade-ins.

Randy Roemhild, Ideal Auto’s manager and a 24-year auto-industry veteran, attends more than 70 wholesale auctions a year, both in the region and as far away as Manheim, Pa., site of some of the nation’s largest auctions.

Ideal Auto is one of the few nonprofit car dealers that acquire their vehicles this way. While dozens of nonprofit programs across the country help the poor acquire their own cars, most rely on donated vehicles, according to data compiled by the Cascade Policy Institute, a think tank outside Portland, Ore.

To best meet the budgetary restraints of its customers, Ideal Auto focuses on economy cars with proven reliability and good gas mileage. However, rising gas prices have increased consumer demand for such cars and made them more expensive to buy at auction.

“Dealers that normally would be buying SUV’s at auction are now buying Hondas and Toyotas because customers at their dealerships are screaming that they cannot afford to get back and forth to work in their trucks,” Mr. Roemhild says.

$1,000 Markup

Ideal Auto marks up the prices of cars it buys at wholesale by about $1,000 to cover expenses, including auto-shipping costs associated with distant auctions and inspection fees and any necessary repair work. Mr. Roemhild says commercial dealers routinely add $2,000 to $3,000 or more to a car’s sales price. Most Ideal Auto cars end up selling for around $9,000 and well below the blue-book values.

JumpStart clients must have jobs and meet certain income requirements to qualify for the program. Those that do receive a zero-interest, forgivable loan of $1,500 to use as a down payment on a car.

The charity also helps participants acquire five-year, low-interest loans at local credit unions. (Since the charity agrees to pay off the remaining principal if a client forecloses on a loan, Mr. Kilde says lenders now compete for its business.)

Training in safe driving and basic auto maintenance are also part of the program, along with mandatory participation in a savings program to cover unexpected repairs.

Mr. Kilde says the concept of a nonprofit used-car lot initially received a frosty reception from the used-car industry at large. After Used Car News, a national trade publication, ran an article on the dealership and JumpStart program in 2001, Mr. Kilde says, the charity received numerous calls from dealers across the country concerned about “government-subsidized competition.”

“I told those dealers that the people that we are helping are not your customers,” Mr. Kilde says. “They couldn’t buy a car on your lot if they wanted to — they don’t have the money and they don’t have the credit. In fact, rather than taking your customers, we are making your customers, because at the end of the program they will have a credit rating and they will have a good job.”

Mr. Kilde says such complaints have since dried up.

Open to the Public

As a licensed dealer, Ideal Auto can and does sell to the general public as well, though at market-rate prices. So far this year, it has sold 18 cars outside of the JumpStart program, largely through word-of-mouth. “It’s still on a limited scale,” Mr. Kilde says of the program’s open-market retail operations. “We haven’t really advertised that, and it’s picking up slowly.”

Mr. Kilde does lament the sort of Catch-22 that keeps the dealership from selling more cars to needy families. While reliable transportation is a key to acquiring a decent job, the JumpStart program is only available to people who are already working.

At a minimum, it costs $350 a month to acquire a car through the program, which includes a car payment and the required full-coverage auto insurance and deposit into a savings account to cover maintenance and repairs. Mr. Kilde says only about one out of every eight people that inquire about the program end up in a car.

“Transportation issues are crucial to everyone who is trying to be self-sufficient and struggling with poverty, but we’re only going to be able to serve a certain window within the population,” he says. “If we can get a toehold, maybe we can move that up.”

Meanwhile, since 2001 West CAP has helped four other charities in the region copy the JumpStart program. In 2004 the Northwest Area Foundation, in St. Paul, gave $60,000 grants to two Minnesota charities to help them start the program. For the most part, these other JumpStart programs acquire their cars through Ideal Auto, which posts its inventory on the Internet and can ship cars throughout the region.

Back in Glenwood City, Ideal Auto’s goal is to sell 175 cars next year. Long-range plans call for adding a service department within the modest metal building. But expand as they might, Mr. Roemhild says the program will never look or act like a traditional car dealer.

“That part of buying a car where you are there for half a day trying to put together a deal with sweat bubbles on your forehead is gone,” Mr. Roemhild says. “We don’t do that.”