Commentary

When I was 16, my mom suggested I take a high-school typing class. I did, even though it seemed pointless at the time. Turns out, what I learned in that class is a skill I’ve used for decades as a journalist.

I can’t say the same for the French and chemistry classes I took. I’m not suggesting schools stop teaching those subjects. But sometimes the most basic classes are the ones that offer lasting value.

Financial literacy comes to mind. It may not rank scholastically with calculus. But it’s a good idea to teach young people how to balance a personal budget, develop a good credit rating and understand how something like a car loan works.

Right now, such knowledge is sadly lacking. It’s often said that in the Internet age car shoppers do so much research online, they often know more about the product than the car salesperson does.

The same can’t be said about consumer knowledge of auto financing. Many people are clueless when it comes to comparing annual percentage rates, knowing the differences between leasing and buying and staying within a price range that fits their budget.

It is not the informed shopper – nor is it the rare shopper – who buys too much car because of the allure of low monthly payments. They are unmindful of the fact that the longer the loan terms, the more the ultimate payout on a rapidly depreciating product.

“The lowest payment attracts them,” says Ann Bybee, corporate manager-planning and communications for Toyota Financial Services. “They don’t understand that it may cost them $10,000 more in the end.”

It’s a bitter lesson when consumers learn they owe lots more on a car than it is worth. Then they get mad. Usually at the dealer or lender. Seldom at themselves.

There should be a better way. And there is.

Many auto makers, dealers and lenders are reaching out to schools and community groups in an effort to bring people up to speed on financing.

“We’ve trained 6,500 teachers in 50 states,” Bybee says at an American Financial Services Assn. conference discussion entitled “Financial Literacy: The New Imperative.”

Among its initiatives, Toyota Financial has created Whyville.org, a social website for middle-school children. There are 6 million registered users. They finance their own virtual cars.

In the process, they learn about interest rates, down payments, credit, leasing and financial responsibility. They learn hard facts, too. If they miss three payments, their cars are repossessed.

Ford Motor Credit has taken its 10-week financial literacy workshops to high schools, colleges and faith-based organizations.

“These programs are designed to help kids learn early,” says Brenda Hines, the captive lender’s vice president of public affairs.

“We didn’t learn a lot about auto financing in school,” she adds. “We learned about it when we bought our first car with our parents.”

No offense to the parents of America, but that is not always the ideal learning experience.

Hines fondly recalls the comment of a student who completed Ford Credit’s financial literacy program. “She was a 17-year-old unwed mother, and she said the course made her think about her life and her baby’s life.”

A grassroots GMAC program called SmartEdge aims to “help people make better financial decisions,” says Donald Ferguson, the lender’s director-corporate relations.

Some residents of low-income communities are wary of firms such as GMAC telling them how to buy cars. “Some folks just don’t trust us, so we go to people in the community – like churches – and become partners,” Ferguson says. “We train them to teach the program.”

One in five surveyed teens don’t know a loan requires interest payments, says Bart McFadden, service director at an Orlando, FL, Boys & Girls Club that operates a 6-week program called “Money Matters: Make It Count.”

Topics include comparisons of payment methods and how taxes and deductions can affect net income.

McFadden recalls the reaction of one teen club member when he got his first paycheck that, after taxes, was less than he expected.

The young man said, “Hey, I was supposed to get $340!”

sfinlay@wardsauto.com