Day: November 1, 2021

Austria’s Klimaticket, the nation’s $3.50 per day, go-anywhere pass to combat climate change, went live this week, CNN reports. The ticket is valid for all publicly and privately operated rail, metro, and bus networks throughout the nation, and with a price tag of $1,265 (€1,095) for an annual pass, the cost works out to roughly $24 (€21) per week or $3.50 per day.

Nationwide travel passes have already been adopted across some parts of Europe, with Switzerland, the Netherlands, and Germany among the countries offering discount programs and other incentives to encourage public transit use. But Austria’s Klimaticket (literally “climate ticket”) is the most affordable option yet, and it marks a major step toward the nation’s goal of becoming climate neutral by 2040 — one of the most ambitious green agendas to date. The federal government has committed $277 million (€240 million) to support the new initiative, with ongoing annual costs estimated to be around $173 million (€150 million), CNN reports.

Austria’s Green Party “super minister” Leonore Gewessler, who helms the nation’s transportation, environment, and energy sector, expressed excitement for the initiative in a press conference announcing it last month. And she’s not the only one: Demand for discounted early bird tickets for the pass initially crashed the Klimaticket booking site.

“I think you can see how happy I am. This is a big day for the climate and for transport. If this summer has shown us anything, it is that the climate crisis has already arrived with us,” Gewessler said via the Financial Times.

As part of its 2030 Mobility Master Plan, the Austrian government means to cut private car use nationwide by about 16% by 2040, reducing it from 70% of total annual kilometers traveled to 54%. At the same time, authorities aim to increase public transportation from 27% to 40% of total annual kilometers traveled while also doubling active travel, such as walking and cycling, from 3% to 6%.

“One of the things I like about Klimaticket is that it is valid on all modes of public transport, a concept that should be replicated elsewhere as it removes the hassle of having to find and buy multiple tickets,” European rail travel expert Andy Brabin told CNN. “It is potentially revolutionary, removing some of the barriers to using public transport and making spontaneous trips much easier as you don’t have to worry about buying tickets, which can often be expensive at short notice for longer journeys.”

If Klimaticket proves successful, it could become a blueprint for other nations to roll out their own affordable options for convenient, nationwide travel. Austria is a relatively small country, so scaling this kind of initiative may prove difficult. Bureaucratic hurdles, too, have the potential to throw a wrench in the works. The Klimaticket’s development has been at the center of fierce negotiations over the past two years, with Austria’s more rural regions, in particular, pushing back against tax dollars being used to subsidize public transit that doesn’t see as high of a demand in their area, CNN reports.

“I think there is an appetite for something like Klimaticket in Germany,” Keith Barrow, editor of UK magazine Today’s Railways Europe, told the outlet. “The Greens’ success in the recent federal election might spur them to emulate their counterparts in Austria and push for a national annual public transport pass.”

Consumer Reports spent a year on an investigative report into auto loans. The magazine’s findings aren’t exactly surprising to any car enthusiast — a frightening number of people are overcharged for car loans. But while we enthusiasts know this in our hearts, CR has the juicy, juicy data to back it up. 

CR gathered its information on almost 858,000 loans from 17 lenders, as well as borrower data including credit scores, income and employment status. These were obtained from mandatory filings submitted to the the U.S. Securities and Exchange Commission in 2019 and 2020 detailing asset-backed securities, which are car loans bundled into an asset investors can buy into. Obviously there are more than 858,000 outstanding car loans in the country, but CR could only look at the loans that required public disclosure.

To put the sample size in context, an Experian report from February of 2021 put total U.S. auto loan debt at $1.37 trillion and the average auto loan balance at $19,865. Multiplying CR‘s 858,000 borrowers by $20,000 gives us $17.1 billion — about 1.2% of the total outstanding debt. On top of the raw data, CR said it examined “thousands of pages of regulatory filings, court records, trade publications, industry reports, financial records, public documents obtained through the Freedom of Information Act, and [interviewed] more than 90 federal and state regulators, advocacy organizations, consumers, lawyers, legal experts, academics, and industry groups.”

Along with longer loans being the norm, CR said the average monthly payment is nearly $600, when 10 years ago it was about $450. Around 8 million Americans are more than 90 days late on those payments. And a regrettable number of loans start off badly, with CR saying 46% of the loans in the data it reviewed were underwater from the get-go, to the tune of $4,000 on average.

Buyers with the same credit scores would get charged wildly different interest rates, with “dealers and lenders setting interest rates based on what they think they can get away with.” This was true even for people with prime and super-prime credit scores, the latter starting at 720 and above. It was also regardless of buyer race and ethnicity since that information isn’t included in the SEC filings.

CR said around 21,000 borrowers in its data set with credit scores higher than 720 were paying off loans with APRs of 10% or more. Two California buyers, each with a prime credit score and each trying to buy a 2017 Chevrolet Trax, financed through GM Financial. One buyer got a loan with a 4.9% APR, the other a loan with a 14.1% APR.

A 2018 Toyota Camry buyer in Maryland, whose “sterling credit” would normally merit a 4.5% APR, instead accepted a six-year loan at 19%. If the buyer had paid off the loan, they would have spent $59,000 on the Camry by the end of 2025. Instead, the car was repossessed.

The issue has occasionally put dealers and lenders at odds with one another. For buyers in the data set, lenders verified income just 4% of the time, which was more often than they verified employment. When the banks don’t do their diligence about a buyer’s loan worthiness, such as verifying income or employment, the dealer can end up with skyrocketing repossessions. In one case in South Carolina, the lending bank even went after the dealership for the bad loans; the dealer then in turn sued the bank.  

One of the crucial takeaways here is the glaring need for consumer education. While the lenders that would go on record told CR buyers have options when it comes to financing, which is incontestably true, a large number of buyers are not aware of (and thus have not been informed about) their options or simply don’t have the time or resources to properly research them. Car buyers are irrationally focused on the car’s purchase price or the monthly payment, not how much they’ll pay through the life of the loan. For some reason, many in the data set expect the dealer to do the best for the buyer.

How often do you suppose that actually happened?

Look no further than the fact that, per CR, at least 80% of car financing is arranged through dealers, who are legally allowed to mark up a lender’s APR by 1%-2%. Paul Metrey, an SVP at the National Automobile Dealers Association, told CR “there is no financial incentive for dealers to present longer-term or more expensive credit options to consumers.” But it seems absurd to us to think that GM Financial wouldn’t find a way to reward a GM dealer who goosed a loan for an extra 2%. It’s hard to turn down free money.

Head over CR to check out the entire story. It’s long, but it should be required reading for everyone getting a loan from any lender to buy any kind of vehicle.

Warhol said, “Art is what you can get away with.” So is auto financing.