Managing money: ‘Everyone's responsibility'

Especially when the economy at large faces a downturn, consumers struggle to bounce back from financial mistakes. Automotive lenders and dealers aim to shield customers from financial risks that could prevent them from buying a vehicle, and many are disseminating educational resources to help their customers and mitigate potential losses.

When credit tightens on vehicle financing and transaction costs rise, many customers either choose to leave or are priced out of the new-vehicle market. Experts say dealers and lenders need to be creative to attract and retain customers in times of economic stress by making sure they're equipped to pay for the vehicle they want or need.

Financial literacy starts in the home, with parents teaching their children how to pay their bills, said Adam Lee, chairman of Lee Auto Malls in Auburn, Maine, which has seven new-vehicle rooftops and 13 used-car stores.

However, some of the responsibility falls to the industry to spread financial awareness, he said.

"It's everyone's responsibility, including the responsibility not to screw them," Lee said. "That's not a popular concept. As a seller, I have some responsibility to look out for the buyer."

Much of consumers' personal finance education is out of dealers' control. Customers' financial literacy could depend on the environment they grew up in and the school they attended, according to Vince Bray, head of corporate communications at Toyota Financial Services.

"You can go all the way through college and never have any kind of home economics or financial literacy class," Bray said, adding that key components of vehicle financing, such as the impact a credit score has on interest rates or the value of a trade-in, aren't always taught in high schools. "These people can all benefit from some tips and pointers. My credit score really is important. And it's better to know that when you're 17 than it is when you're 25."

Financial literacy is an invaluable skill for vehicle buyers regardless of the state of the economy, said Jim Houston, senior director of J.D. Power's auto finance practice, and informed consumers make better decisions regardless of the market.

When it comes to financial literacy, Houston said dealers should start with the ins and outs of the customer's car deal.

Consumers should leave the dealership fully informed of the terms of their loan or lease as well as the lender that financed the deal and how to contact that lender, he said.

"I don't think dealers don't want to communicate that to the customers; however, sometimes it's missed. The more information the dealer can provide the customer, the more effective the onboarding process is for the customer," Houston said.

Only five states require money management courses for high school graduation. The Florida Senate introduced a bill in November to become the sixth.

"The Legislature finds that, in light of economic challenges nationwide, sound financial management skills are vitally important to all Floridians, particularly high school students," the bill states.

Still, there are more online resources for customers than ever before, and the auto industry is involved in some of them.

MoneySkill, a free online personal finance course, offers three educational modules on vehicle finance for high school and college students, and one for middle school students. The modules were developed in partnership with the National Automobile Dealers Association and the American Financial Services Association Education Foundation.

Content examines the process before, during and after a vehicle sale through the lens of a customer. Topics include calculating fixed costs vs. variable costs, comparison shopping, the benefits and drawbacks of leasing, and the relationship between credit rating and interest rates.

There's even a module that focuses on how to negotiate in a dealership, according to Rhonda Ashburn, executive director of the foundation.

"The earlier you start learning the financial concepts the better — it creates for long-term challenges if you can't make financial decisions," Ashburn said. "You're going to end up in a financially challenging situation."

Since their inception in 2002, the vehicle finance modules have enrolled 880,000 users. MoneySkill is accessible in all 50 states and close to 40 countries.

Lenders benefit in the long run from assisting customers in harder times, both in providing financial learning materials and allowing payment relief. Fiscally secure customers are more likely to come back to the dealership and finance with the lender again. Extending a helping hand drives loyalty to the brand, Bray said.

"It is morally the right thing to do, but financially it's the right thing to do, too," said Bray. "These customers are going to get back on their feet. They're going to remember that [the lender] was there to help them out when they needed it."