The next refinancing boom?  Car buyers with longer-term loans might be tempted to refinanced, but it's only worth it for certain drivers.

The next refinancing boom? Car buyers with longer-term loans might be tempted to refinanced, but it’s only worth it for certain drivers. (Chase.com – click for site)

Auto sales keep setting records, with 2015 seeing the highest number of trucks and cars ever sold (more than 17 million). This is partly because borrowing money to buy cars keeps getting easier. Longer terms, lower credit score requirements, and persistently low interest rates keep enticing Americans to buy new wheels.

Most of those cars are financed — about 85% are purchased with a loan, or leased. As a result, the total outstanding balance on car loans in America is also higher than ever before (and higher than the total outstanding credit card balance in the nation), at more than $1 trillion, according to TransUnion.

A simple phone call to a lender could ease some of the monthly budget pain caused by that $1 trillion. Just as home loans can be refinanced, auto loans can be refinanced, too. In fact, getting a better deal on your old car loan is a lot easier than refinancing a mortgage. While it may not be worth the trouble for consumers with good credit who got decent financing when they bought their car, other drivers could see big savings by refinancing.

To keep the factories churning out record numbers of new cars, automakers keep stretching the limits of new car loans. More than 1 out of 5 new car loans now go to subprime borrowers. Also, the old 5-year, 60-month auto loan standard is so 20th Century. Ford recently joined several of its competitors in offering an 84-month loan to dealers around the country. In fact, loans lasting 73-84 months now make up 29% of the market. (Experian reports that the average subprime new car loan lasts 72 months.)

Longer loans mean lower monthly payments, of course, but also higher borrowing costs. Because subprime loan rates often come with double-digit interest rates, the financing costs can really add up. Seven years is a long time to be paying that much to borrow money.

Here’s the good news: Auto loan refinancing loans are now available for around 3%, which is a far cry from the average rate for a subprime car loan right now of 10.4%.

Google “auto loan refinance,” and you’ll see banks are competing fairly heavily for business. Call the bank where you have your checking account; the bank will probably have a simple auto loan refinancing offer, which may not even include a fee.

A $20,000, 6-year car loan at a 10.4% rate equals monthly payments of about $375. After two years, the balance on the loan would be $14,657; but the consumer would still be facing $18,000 worth of payments ($375 for the next 48 months).

(This story first appeared on Credit.com. Read it there.)

If the loan is refinanced at the point, the savings are dramatic. Payments would drop to $324 per month (more than $50 in savings!) and the total remaining payments drop to $15,552. That’s just about $2,500 over the life of the loan. Certainly well worth the call to a lender.

Granted, this scenario is for a nearly ideal auto loan refinancing candidate (this imaginary consumer went from subprime to prime borrowing status within 24 months), so it wouldn’t apply to everyone. It’s not impossible, but it’s not common.

Still, last year, Experian said there was $178 billion worth of outstanding subprime loans held by consumers. It’s a good idea to make a goal of reaching prime status. The ability to refinance into a much cheaper car loan can be a nice carrot to help inspire anyone to go through the process.

Now, let’s examine a consumer who might be tempted to refinance because she or he got a not-terribly-great-rate from their auto dealer. We’ll say this consumer borrowed $25,000 for seven years at a kind-of-ugly 4.5%. Those 3% refinance rates can sound attractive — and if we were talking about refinancing a home, a 1.5% rate drop would probably be worth it. But with a simpler, shorter car loan? Not so much.

The driver above would be facing 84 months of $348 payments. After two years, there would be $18,639 left on the loan. Refinancing that amount at 3% over the past 5 years of the loan would result in some savings — about $13 per month. That’s still about $780 over the life of the loan, but remember, that savings is spread over five years. Perhaps not worth the call.

There are no solid rules, but consider this — for every $10,000 borrowed, a drop of 1 percentage point is worth about $5 per month over 48 months. Roughing out the subprime-to-prime example above: a 7% drop is worth $35 (times 1.5 because the balance is about $15,000) and there would be a bit more than $50 in monthly savings. But if the drop is from a 4% rate to a 3% rate, the savings probably wouldn’t be more than enough to buy you an extra tank of gas each year (depending on gas prices, of course).

But as the auto industry continues to encourage longer-term, higher-dollar-value car loans, the calculus toward auto loan refinances continues to tip in consumers’ favor, so it doesn’t hurt to ask.

If you’re thinking about taking out an auto loan to finance a car, it is smart to check your credit first, as agood credit score can help you qualify for better terms and conditions. You can see two of your credit scores for free each month on Credit.com. If you don’t like what you see, you can take steps to improve your credit score to help you prepare to buy your next car.

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What get stolen during a phishing attack. Verizon chart. Click for full report.

What get stolen during a phishing attack. Verizon chart. Click for full report.

Sometimes, people get tired of hearing the same old advice — but they need to hear it again, anyway. Eat healthier.  Exercise more.  Spend less. And

DON’T CLICK ON ATTACHMENTS IN EMAILS YOU DON’T EXPECT.

I know, I know, you would never do that.  But you’ll be stunned to find out how many people do.  In fact, that’s the big lesson from Verizon’s annual Data Breach Investigations Report. We’ll get to that in a moment. But first, let me discuss human nature — because that’s what we’re really talking about here.

I’d have a really tough time pitching a story to an editor about phishing. That story is so 1999.  And yet, there’s a reason your inbox and mine is still full of notes claiming to be from banks that need your account number and password. Phishing works.

And it doesn’t only  work on you. It works on big organizations. Like hospitals. There are multiple reports that the dramatic ransomware attacks suffered recently by health care providers — you know, the ones that reduced hospitals to scheduling surgeries with pencil and paper — began with successful phishing emails. Yes, employees click on emails, and they click on attachments, and then, hackers are off to the races.

Why does this keep happening? Human nature is pretty tough to overcome.  Think back to one of the original global virus epidemics — the LoveBug. It worked for one reason: Who doesn’t want to get a love letter?

Techniques have only improved since then.  Today, hackers can hand-craft phishing emails with personal details, such as “Our boss Rick really needs you to open this file for him.”

The other reason Phishing works is borrowed from the bank Pink Floyd — the Momentary Lapse of Reason.  You can have your guard up 23 hours and 59 minutes a day (I hope you aren’t reading email that much), but all it takes is one slip, and down the hole the hackers go.  We all get distracted and do dumb things.  We are all vulnerable some of the time.  Hackers have 24 hours every day to attack.

And so, phishing works. In fact, Verizon seems to think it’s actually worked “better” last year than the year before.  In the dataset Verizon studied, 30 percent of phishing messages were opened — compared to 23 percent the year before.  And 12 percent of the time last year, recipients went on to click a malicious attachment or link, enabling the attack to succeed. (Last year, 11 percent).

Ever more alarming, on average, it took fewer than 4 minutes for targeted recipients to open a phishing email and click on a malicious link.  Hackers get to work quickly.

It’s important to know that the attacks targeted hospitals and other organizations are not your father’s phishing.  These bad guys aren’t trying to direct victims to a website and trick them into entering credentials or account numbers. They simply want to execute rogue code on the victims computer through an exploit, so they can then have their way with the target network — install ransomware, for example.  In the old attack, victims had a third moment to pause and consider the gravity of their actions (open the email, click on link, enter data).  New phishing emails only offer two such moments, and they are much more passive. That makes phishing more dangerous.

And that’s partly why ransomware made the biggest jump in Verizon’s list of most common attacks.

Red Tape Wrestling Tips: Training, filter, segmentation

Email users still aren’t getting the message. As Verizon’s report puts it: “Apparently, the communication between the criminal and the victim is much more effective than the communication between employees and security staff.”

So what can you do? Don’t be afraid to give — or receive — old warnings about diet, exercise, and phishing. If you are too smart for all this, endure the training for the sake of your colleagues, and your organization. Someone on your team — probably several someones — has clicked on a phishing email recently. The data you save may be your own.

In addition to training, organizations can help themselves by filtering out phishing emails so they never get to employees in the first place.  And perhaps most critically, they should carefully segment networks so when human nature strikes, the damage is limited.

 

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On the left, 1996 expenses for a family of four. On the right, 2014. Pew infographic. Click for report.

On the left, 1996 expenses for a family of four. On the right, 2014. Pew infographic. Click for report.

Here’s all you need to know about the fragile state of the American middle class. An online payday-type lender named Elevate Credit sees the middle class as its target market.

“Decades–long macroeconomic trends and the recent financial crisis have resulted in a growing ‘New Middle Class’ with little to no savings, urgent credit needs and limited options,” the firm says on its website.

The new middle class. Lining up to borrow money at triple-digit interest rates.

You probably think of payday lenders as unsavory places where Americans without checking accounts must go to cash a check, or where folks without credit cards rob Peter to pay Paul so they can pay the electric bill.  Well, if Elevate is to be believed, triple-digit rate loans aren’t just for the poor anymore.

As part of my Restless Project, I argue often with anyone who will listen that the American economy is seriously broken — and the middle class has a lot more in common with the poor than the rich.  Folks who don’t realize this aren’t paying attention, and they’re destined to be surprised when they find themselves shopping for payday loans someday.

How did this happen?  Easy. Monthly expenditures are up for families, while incomes are flat. More money is going out, while more money isn’t coming in.  Each time costs edge up while income doesn’t, people are closer to the “don’t even have one month’s of emergency savings” category.

The new middle class is the restless class. They might live in a nice-enough house, and even have some nice clothes. But they are one illness or one layoff away from a very uncertain future.

The Pew Charitable Trusts recently broke down the “more money is going out” data is a report blandly titled “Household Expenditures and Income: Balancing family finances in today’s economy.” There’s nothing bland about its content. From 1996-2014, a typical American family spent about 25 percent more on housing, food and other basics.    During the 1996-2014 time frame, the biggest expenditure jumps came in housing, which grew from $12,300 annually to $17,000 annually, and health, which jumped from $1,119 to $2,560.

But incomes didn’t keep pace with rising costs.  As a result, “slack” — or money left over at the end of the month — is disappearing from the family budget.  On average, Americans spent 71 percent of income on the basics in 1996, and in 2014, it was 75 percent, and headed the wrong way.

The recession really exacerbated the problem.

“From 2004 to 2008, median household income grew by only 1.5 percent, while median expenditures increased by about 11 percent,” Pew said. “By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.”

Do your own math.  The typical household – using “median ” data — saw its spending grow from $29,400 in 1996 to $36,800 in 2014, or roughly $3,000 a month.  Using “average” numbers, spending grew from from $43,200 to $54,800 during that span, or about $4,500 a month.

How does your family compare?  Recently, I asked readers to share their monthly budgets with me — asking how some families live on less than $60,000 annually — and these figures are in line with what I heard from you.  Here’s a typical budget from Texan Matt DeMargel

Rent: $1,350
Healthcare: $588
Utilities: $400
Child care: $600
Food: $800
Car insurance and gas: $300
TOTAL: $4,038

(Note, the DeMargel family was lucky enough to pay nothing for child tuition or student loans.)

Even that modest budget requires a roughly $60,000 salary, before taxes. Remember, these are real expenditures, so they must be paid with after-tax, actually-hit-your-checking-account dollars.

Of course, people at the lowest economic rungs struggled the most.  Households in the lower third spend 40 percent of their income on housing, while renters in that third spent nearly half of their income on housing, as of 2014.  That’s a flat-out terrifying way to live — renting, and giving half your paycheck to a landlord.

But it’s important to note that struggles and anxiety are continuing to reach deeper into that “new” middle class.

Back in 2004, the typical household in the lower third had a little less than $1,500 left over every year after accounting for annual outlays – so-called “slack” in the budget. Just 10 years later, slack for this group had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures.  Those without credit cards turned to products like payday loans.

Slack has all but disappeared from the “middle third” folks as well, however.  The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014.  In other words, the “leftover” line on the monthly budget fell from about $1,500 to $500 for America who are solidly middle class, approaching upper middle class. That’s $500 to deal with every emergency car repair, unexpected health issue, or Heaven forbid, a vacation.

No, living without slack is nothing like standing on bread lines. But it is frightening enough to keep you up at night. And it should help you realize that the “new” middle class, the restless class, has a lot more in common with the poor than the rich in America.

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Always do an estimate reality check. Sites like RepairPal.com will give you a rough idea of what repairs should cost. (Click for site)

Always do an estimate reality check. Sites like RepairPal.com will give you a rough idea of what repairs should cost. (Click for site)

A captive consumer is someone who isn’t in a position to bargain and, in turn, could overpay. For example, a traveler purchasing Wi-Fi on an airplane is captive because there’s only one option and a pay TV subscriber is captive if there’s only one cable company in the area, or if it’s difficult to install a competitive satellite service.

Drivers facing car repairs are often captive, too. When your car breaks down and you have it towed to a repair shop, you don’t have a lot of options but to get it repaired. And, for most drivers, pulling into a car dealership shop for “regular” repairs can create almost the same situation. Few consumers are car-savvy enough to know if they really need new brake rotors or a transmission fluid flush, so they end up doing what they are told by the expert, and paying the bill.

Gotcha.

Car repair shops routinely attract a high level of complaints at state and federal offices related to overcharging and “gotcha” methods. (Read this guide to find out 7 ways to avoid getting overcharged by your mechanic.) Auto mechanics may work on commission or at an hourly rate, which may incentivize them to perform unnecessary repairs that can turn $40 oil changes into $600 bills. Plus, repair shops have the advantage of using the “safety” tactic in their sales pitch (as in, “Well, you don’t have to change your brake pads, but they are below 50%. I would, to be safe.”)

(This story first appeared on Credit.com. Read it there.)

Consumer Reports’ chief mechanic John Ibbotson puts it this way: “High scare equals high profit.”

It’s hard to give anti-gotcha advice in the face of safety warnings – I have no intention of suggesting that you do anything to make you or your family less safe. But it is possible to do that and avoid ripoffs.

It’s Not The Nickels & Dimes — It’s The Dollars

You’ll probably end up overpaying for a repair at some point in the life of your car. That’s not the end of the world. What’s important is to not get routinely ripped off, and discover that you’ve spent $1,000 or more year after year on repairs that may not be essential. AAA reports the average driver pays $766 per year on maintenance and repairs, which of course can vary based on the age of the car. But if you are spending more than that, ask yourself why. And remember, the nice service manager at your repair shop is in the sales business. If your oil changes routinely end up costing $500, you may want to consider breaking up with the shop.

The Medium Bills Are What Will Get You

Transmissions fail and engines give up the ghost. It happens. Major repair bills often have as much to do with bad luck as anything else, so I’m not going to dwell on them. This repair tech at Edmunds.com revealed that shops often don’t make that much money on big, expensive and complex jobs. Where the real financial win comes into play for them are on the medium-sized jobs that are easy and can be done quickly. They make money on brake jobs, engine flushes, and so on. Keep that in mind for your next visit to the mechanic and you’ll likely have more confidence as a consumer, giving you an advantage.

“Service advisors are wary of customers who look like they know what they’re doing,” the shop worker told Edmonds.com.

Just Say No

Repair shops may tell you your bill is about to balloon, and get your permission, usually with some friendly language like, “You should really get this taken care of now.” But do you really need that transmission flush? There’s a big difference between dealer recommended service and manufacturer recommended service. A good rule of thumb is to follow the later, which you can find in service manuals and on carmaker websites.

Diagnostic Fees

One of the most popular and lucrative gotchas at repair shops is the dreaded “diagnostic fee,” a service charge for establishing the problem with your vehicle. Sometimes it genuinely takes an hour or two to diagnose a repair problem. But Kristin Brocoff of CarMD.com said that it is also possible for techs to plug into the car’s computer and get a diagnosis in seconds.

“It takes less than two minutes for the service writer or tech to use a scan tool on your car,” Brocoff said. “If the problem ends up being something simple like a loose gas cap, most shops waive or discount the diagnostic fee, but some charge upwards of $100. Ask a lot of questions and know what tests they’re running on your car.”

If you want to run a test yourself and compare your results to what a service tech is telling you, you can purchase a OBD2 reader that can read the car’s computer diagnostic codes. It’s important to note that the codes they generate don’t always tell the whole story, and they can be misinterpreted.

Brake for Second Opinions

Car brake repairs range from simple and cheap (brake pad replacement) to the really expensive (rotor and even caliper replacement). It’s easy for shops to say you need the expensive work when you could get away with the cheaper job. They might even show you what looks like a terribly dirty, worn rotor. But rotors can be repaired (turned) instead of replaced, for example. If a shop tells you that you need a full brake replacement, go to another shop and get a second opinion. The variety of quotes you’ll receive for repairs like this can be eye-opening. (Last time I replaced my tires, I was told I needed $500 worth of repairs on my front brakes. A month later, they were fixed elsewhere for $200.)

Smell, Listen, Look, Feel

This leads to perhaps the most important piece of gotcha-fighting advice. You have a relationship with your car. Treat it like a friend, and it’ll do the same for you. Listen to it; look at it; smell it; feel it. Listen to the sounds it makes. Hear a sound like an airplane landing when you press on the brakes? Take it in before a cheap repair becomes and expensive repair. See a puddle stain in your parking spot? Get help. Smell something unusual when you turn it off? Open the hood and look around. Feel a drop in performance when you accelerate on a highway? Notice a drop in gas mileage? Take it in. The most important way to avoid overpaying is to avoid the captive consumer situation. A good rule of thumb: You want to drive to a repair shop, not get towed there. Avoid letting things go until the situation is dire, and it’s not really possible to get second opinion quotes.

Question Line Items

When Popular Mechanics interviewed an anonymous repair tech a few years ago, he shared that many shops add annoying tack-on fees like “shop supplies.” That means you might be getting charged $20 for a shop rag. Feel free to ask and challenge the shop on these charges. Doing so is fair and can put the shop on notice that you aren’t a pushover.

Use Online Tools for a Reality Check

Finally, there are plenty of clever tools now that can give you a rough idea of what repairs should cost in your area. Consumer Reports has one; So does RepairPal.com. They won’t be exact, but you’ll have a good idea if the quote you are getting is fair. Also keep in mind that if the quote is too low, ask questions to help make sure your shop isn’t planning a bait and switch.

Even if you do avoid a car repair gotcha, it’s important to have an emergency fund so a pricey repair doesn’t turn into unwanted debt. Having outstanding or large debts can hurt your credit score and you’ll want a strong score in the event that your car is damaged beyond repair and you need to get a new one. Having a good credit score may make it easier to get approved for an auto loan with an affordable interest rate. You can keep an eye on your credit score by viewing two of your credit scores for free each month on Credit.com.

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list below or click on an advertisement.



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Click to read Grow's project.

Click to read Grow’s project.

To paraphrase Stalin, $1 trillion is a statistic; an unemployed student loan borrower with a $900 monthly payment is a tragedy.

It’s almost graduation season, which means it will soon be time to reveal how special, and record-setting, this year’s college graduates are.  Setting records for debt, I mean.

Six years ago, a nearly unthinkable line was crossed: Americans’ total outstanding student loan debt surpassed total credit card debt. The nation’s student loan burden has only ballooned more since, and it’s now 1.5 times the size of credit card debt.  In one decade, America’s unpaid bill for higher education grew from $600 million to $1.2 trillion, and it now exceeds total auto loan debt, too. Only Americans’ mortgage debt is larger.

College grads from 2015 left school owing an average of $35,000, a record. But even that figure hardly tells the real story.   Students who go on to graduate school often up end with even bleaker balance sheets.  One-quarter of all grad degree earners had borrowed more than $100,000, according to a paper published last year by the New America Education Policy Program. One in 10 borrowed more than $150,000. Try to repay that in the recommended 10 years and you’d end up with monthly payments of $1,750, assuming a modest 6.8 percent interest rate.  Most opt for 20 or even 30 year terms, making it entirely possible that today’s students will be still be paying for their own college tuition when the first bill comes for their kids’ college tuition.

What does a debt burden like that do to a young adult just starting out?

The folks at Acorn’s Grow online magazine recently released an excellent series called “The Faces of Student Loan Debt.”  As part of the project, they asked me to explore the real-life cost of student loans — to young adults, and to our society at large. You can read the full piece over at Grow.Acorns.com.  But here’s a brief list of consequences for students:

  • They live with their parents, into their 30s. More 25-34 year olds are still in the nest than at any time since the Census Bureau started counting in 1960. This hurts their parents too — they put money into their adult children’s lives that the should be saving for retirement.
  • That also means they aren’t buying starter homes; so people in starter homes have a harder time trading up
  • They put off marriage and kids.
  • Their credit takes a hit.
  • They aren’t forming startups.
  • They aren’t following their passion. They aren’t saving for retirement.
  • They are working second jobs, however. The highly indebted are about 50 percent more likely to hold down more than one job (33.0% of debtors vs. 23.4% of non-debtors, according to one research paper.)

Keep reading the series, or my story, at Grow.

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Adam Levin (second from left) pledges his support to the Cox Institute as Dean Charles Davis, Keith Herndon, Janice Hume and guest speaker, Bob Sullivan, look on. (University of Georgia photo)

Adam Levin (second from left) pledges his support to the Cox Institute as Dean Charles Davis, Keith Herndon, Janice Hume and guest speaker, Bob Sullivan, look on. (University of Georgia photo)

Friend and fellow consumer crusader Adam Levin recently pledge to give $150,000 to the University of Georgia’s journalism school. The donation will help train and inspire young journalists for years to come.

It’s exciting news for me because the donation is directly tied to helping young people invent (rescue?) the future of journalism. And now is as good a time as any to announce that I am working with the school — I’m now a adviser to the Cox Institute for Journalism Innovation, Management and Leadership, housed in the Grady College of Journalism and Mass Communication.

My work with the school will be devoted to figuring out how journalists — particularly independent journalists — can survive and keep doing the important work of protecting democracy by telling stories folks don’t necessarily want to hear.

A couple of years ago, not long after I began my adventures in what I call Sustainable Journalism, I met another fellow crusader, professor Keith Herndon.  A newspaper and business veteran, Keith joined the University of Georgia not long ago, where he set out to figure out what 21st Century journalism might become.  He heard me speak on my project, and we became fast friends and co-conspirators. I’ve since helped organized a symposium on independent journalism at Georgia,  and much more is coming on that front.

Meanwhile, here’s a bit more on that great work that Adam will be funding, cribbed from the announcement on the school’s website

Levin’s pledge of $150,000, made on behalf of himself and his wife, Heather McDowell, will fund speaker expenses, provide training materials and sponsor the annual leadership awards banquet. The Cox Institute began the leadership development program four years ago and has since trained 55 of the college’s best undergraduate journalism students who were competitively selected to participate.

“We are delighted to have the support of Adam Levin and Heather McDowell for this very important program at the Grady College,” said Charles Davis, dean of Grady College. “They share our vision and recognize the necessity of developing our students as future leaders of a news industry that is undergoing significant change as the digital transition continues.”

Levin is a consumer advocate with more than 40 years’ experience in personal finance, privacy, real estate and government service. He is the author of “Swiped: How to Protect Yourself in a World Full of Scammers, Phishers, and Identity Thieves” published by PublicAffairs. A former director of the New Jersey Division of Consumer Affairs, Levin is chairman and founder of Identity Theft 911, co-founder of Credit.com and has served as a spokesperson for both companies. Levin writes a weekly column which appears on Credit.com, The Huffington Post and ABC-News.com. He is a highly sought after commentator on cybersecurity and privacy issues, and is a frequent guest on programs including “MSNBC Live with Thomas Roberts,” “NewsNation with Tamron Hall,” “Fox Business Network After the Bell,” “Good Morning America,” “Fox & Friends,” “CBS Evening News,” CNBC, “ABC World News Tonight,” “ABC News Nightline,” “Fox News America’s News HQ” and scores of radio stations throughout the country.

“Heather and I are proud to support such an important program at a great American institution like the University of Georgia,” said Levin, “The development of professional journalists is paramount to our society. Now more than ever, we need people to be story tellers of this generation—to give voice to those who often have no platform and to have the courage to shine a spotlight on conditions and issues many would prefer to leave in the shadows. Having spent time at the Cox Institute, I cannot think of a better group of people to take on this challenge.”

Levin was introduced to the Cox Institute’s leadership program through Bob Sullivan, a Peabody Award-winning consumer journalist, who serves on the Cox Institute’s board of advisers. Sullivan is the author of the bestselling books “Gotcha Capitalism” and “Stop Getting Ripped Off.He was a reporter for “In Plain Sight: Poverty in America,” an NBC documentary, which won a Peabody Award in 2013. The Peabody Awards are administered by University of Georgia’s Grady College.

“The support from Adam Levin and Heather McDowell recognizes the value of training that provides students with insights needed to make a difference in their careers,” said Keith Herndon, the journalism professor who directs the leadership program. “We also appreciate the leadership our adviser Bob Sullivan has provided in facilitating this important relationship.”

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list below or click on an advertisement.



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CarMD graphic

CarMD graphic

When your car’s check engine light flicks on, the first thing that pops into your head is probably “how much is this going to cost me?” But new data show that for newer cars about half the time the problem is often as simple as a loose gas cap.

That doesn’t mean you should ignore the warning light, however. Common check engine repairs can range from a $15 gas cap replacement to a $1,100 catalytic converter replacement and everything else in between. The most common repair across makes, models and years is oxygen sensor replacement, whose average cost is around $250, according to the annual CarMD.com Vehicle Health Index, released Tuesday.

Repair costs around the country remained just about flat over 2015, with a 1.5% increase in parts costs offset by a modest 4% reduction in labor costs, CarMD.com Corp. says. (The firm gets its data from car computer readings — i.e., OBD2 codes — submitted by repair facilities; for the 2015 study, CarMD examined 1,019,904 repairs.)

Overall, the average repair cost in 2015 was $387.31 ($155.15 in labor, $232.16 in parts). That’s 8% less than the 10-year high of $422 in 2006. One big takeaway from the data: If you have a new carand the check engine light goes on, check your gas cap.

(This story first appeared on Credit.com. Read it there.)

“The most common reason the check engine light comes on in a brand-new model year 2016 vehicle is due to a minor loose gas cap problem, accounting for 46% of check engine incidents on new vehicles last year,” the report said.

Another lesson: Mother Nature has a lot to say about car repair costs. “Vehicle owners in the Northeast saw the largest drop in average repair costs, which were down 6.5% from $418 in 2014 to $391 in 2015 due in part to the mild El Niño weather pattern,” the report said.

That’s the good news. The bad news is perhaps self-evident: The average cost to repair 2006 cars was $399, double the average repair cost of 2016 models (whose repairs were usually covered by warranty). Worse still, the second-most common repair involved those pricey catalytic converters. Rounding out the top five were replacements for the “ignition coil and spark plug” ($390), gas cap replacements and checks and thermostat replacements ($210). New to the top 10 most common repairs were evaporative emissions purge control or solenoid replacements, which both cost just less than $200.

“One of the best ways to minimize cost of ownership and help reduce unforeseen car repairs is to follow a regular maintenance program and take care of small problems as soon as you’re aware of them, particularly as vehicles age,” said David Rich, CarMD’s technical director. A simple spark plug failure can snowball from a $50 part into a $400 repair, the firm said.

“Over the years, we have observed that climate and weather patterns has some impact on type and frequency of repairs,” Brocoff said. During 2013, when the Polar Vortex hit, car repair costs were up 6% across the U.S. and 9% in the hard-hit Midwest and Northeast. Battery, transmission and thermostat repairs shot up. Also, spark plugs were the fourth-most common reason for check engine light issues.

“This past 2015 calendar year, during which the U.S. experienced an El Niño weather pattern, spark plugs were only the eighth-most common reason for check engine light issues,” she said. “Battery replacements are not listed on the 10 most common repairs this year.”

Take a look at the top 10 car repairs of 2015:

  1. Replacing an oxygen sensor – $249
  2. Replacing a catalytic converter – $1,153
  3. Replacing ignition coil(s) and spark plug(s) – $390
  4. Tightening or replacing a fuel cap – $15
  5. Thermostat replacement – $210
  6. Replacing ignition coil(s) – $236
  7. Mass air flow sensor replacement – $382
  8. Replacing spark plug wire(s) and spark plug(s) – $331
  9. Replacing evaporative emissions (EVAP) purge control valve – $168
  10. Replacing evaporate emissions (EVAP) purging solenoid – $184

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Do the math: A good lease vs. buy calculator at Edmunds.com

Do the math: A good lease vs. buy calculator at Edmunds.com

Americans love a good rivalry. Yankees vs. Red Sox. Coke vs. Pepsi. Republicans vs. Democrats.

And … leasing vs. buying?

Leasing a car is sizzling hot right now. New data show one out of every three new cars is leased. And leasing may very well rule the future, as it shot up 46% over the last five years among millennial new car buyers. To those who think leasing is always a terrible deal, this is a travesty. To leasing fans, it’s vindication.

The topic of car leasing brings out a lot of emotion in drivers. Many people think leasing is non-sensical because after making payments for three years, consumers own nothing. But, in reality, that’s an inaccurate assessment and whether or not you should lease depends — not only on the driver’s needs but on those of the auto industry. Sometimes car makers offer incentives that make leasing attractive. So those who dismiss leasing outright could be missing out.

(This story first appeared on Credit.com. Read it there.)

The truth is, leasing is more expensive than buying most of the time. The average American keeps a new car for six-and-a-half years, but a 2012 survey found Americans intend to keep their cars for up to 10 years. In either case, buying will probably be cheaper than leasing because when you buy a car, the monthly payments will eventually stop. Pay off a car loan, you keep the car; pay off the lease, you just get another. So the longer you intend to keep a car, in general, the better it seems to buy.

However, even in that equation, there’s a hitch. My four-year-old Toyota Rav4 needed a new transmission recently, as is typical of Rav4’s.  (I found that out too late.)

As a high-mileage driver, I was out of warranty, and out of luck.  My repair bill was $5,000 (Toyota kicked in $1,000 after I complained).  That kind of repair bill meant I lost the leasing vs. buying lottery.

The big advantage that leasers have is similar to the advantage that renters have over mortgage holders: no surprise repair bills. As long as drivers stay within mileage limits, anything that happens to the car is generally covered under warranty.  One reader put it like this:

“I’ve been leasing for about 10 years now. No unpredictable repair shocks to my wallet because I’m always driving a new car,” she said.

Of course, the mileage cap is the other big factor in the lease vs. buy equation. People with a long commute or who like to travel shouldn’t lease.  Generally, leases limit drivers to about 1,000 miles per month. Exceeding the limit is expensive from 10 to 30 cents per mile.  But the mental drain of watching your miles every week is also a drag. Imagine turning down a chance at a road trip because you are afraid of your mileage cap.  This element is especially critical because dealers have been sweetening lease deals lately with even more complex (i.e. lower mileage caps) lease arrangements.

One factor often cited as a reason to buy is a bit of a red herring: equity. It’s usually stated something like this:

“With buying, you own something of value after you pay off the loan. With leasing, you have nothing at the end.”

While that’s sort of true, it’s not very true. First of all, cars are terrible assets.  They lose value quickly, and in unpredictable ways.  The value of what you own after making four years of loan payments is up for debate.  In the end, I find most five or six year old cars are worth a few thousand dollars as a trade-in at a dealer.  Perhaps Kelly Blue Book value suggests your car is worth X. but what actually matters is the money you get when you need it. Used car sales are so clunky that it’s silly to use those lease vs. buy calculators and feel vindicated that you’ve saved $982 by buying vs leasing after five years.   You might give all that value back to the dealer when you get wholesale value instead of street value for your car.

In the end, people want (and need) reliable transportation and few surprises.  So you can see why leasing is attractive. But here is a thorough list of the good and bad of leasing  vs buying.

Why leasing might be better than buying

Less sales tax: You don’t pay sales tax on the full price of the car, but rather only on the value of the car you use during the lease.  (If you buy the car at the end of the lease for its established ‘residual value,’ you’ll pay the rest of the sales tax.)

Tax benefits: For some folks, leasing is a much easier tax write-off.

Luxury: You’ll probably be driving around in a nice, new car every three years.

Feels cheaper: Your monthly payments, and your down payment, will probably be lower.

No repair surprises: Fear of big repair costs will definitely be lower, approaching zero, for lease holders.

Buy ‘used’ for less: If you are a particularly low-mile driver, you might get a bargain at the end of the lease by buying the car at its residual value. (Sometimes, but rarely, is this cheaper than buying the car in the first place.)

Why leasing isn’t better than buying

End-of-lease risks: What happens when the lease ends? I can’t tell you, and it’s a big downside risk.  “Wear and tear” damages you might have to pay can make a good lease deal a bad lease deal very quickly.  And the dealer pretty much has you over a barrel, with no bargaining power, unless you are about to buy or lease another car there.

Inflexibility: Young people seem to be attracted to leases because they feel flexible – leasing seems shorter-term than buying. But leasing is often less flexible than buying, because it’s much harder to get out of a lease than sell a car (Even a car with a loan balance.) What happens if you take a job in a city where it’s unrealistic to have a car? Leaseholders can get really screwed in that situation.

Miles: Perhaps 1,000 miles per month sounds like a lot to you today, but what if your company moves to a location 35 miles away 18 months from now? Miles limits can be pretty oppressive, particularly in a world full of unknowns. The average 20-something holds 7.2 jobs before age 29; the future is hard to predict.

Overall cost: Any way you slice it, leasing is more expensive than buying, even with a loan.  Here’s a simple way to look at it.  Both are just methods to finance a car.  With leasing, since you are paying less upfront, you are borrowing more, and for a longer time.  So of course it costs more.  Another way to look at it: With leasing, rather than make a down payment up front, you have the option to make a down payment three years into having the car (buying the car for its ‘residual value.’) That essentially means you are borrowing more money, for longer.

As with all generalizations, these concepts might be more or less true for you based on your unique car deal. Remember: Everything is negotiable at a dealership.  The upfront costs. The monthly payment. The residual value. The ‘money factor,’ which is the leasing term for interest rate. Even the mileage (you can buy extra miles upfront, for less than you would pay after three years).  So it’s possible you can lower the leasing risks through negotiation, or car-marker incentives.  If so, leasing might be a good idea for you.

But my bottom line: Leasing is a bit to much like the Hotel California for my taste. Once you check in to leasing, it’s pretty hard to check out. Leasers turn cars in and get new leases, and they tend to do so at the same dealerships, for the reasons mentioned above.  That means you’ll never escape the monthly car payment. And worse, perhaps you’ll get a good lease deal today, but three years from now, leases will be out of favor and you’ll be stuck.

In the end, leasing is a seductive but bad plan for saving money.  But for folks who care less about money, but more about having a new car every three years, don’t drive a lot, and lose sleep over repair bill risks, leasing can make sense.

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Image included in DaCosta v AM Retail lawsuit

Image included in DaCosta v AM Retail lawsuit

Buy a pair of boots at an outlet store for $45, when it appears the boots once sold for $180, and you probably think you got a great deal. But what if the $180 price is fake? And the real original price was…..$45?

Would you still buy the boots? Or would you feel cheated?

Diana DaCorta walked into a Bass Outlet store last fall and saw the price tag pictured here.  She bought the boots, thinking she’d found a big sale. Instead, she finds herself as the lead plaintiff in lawsuit that seeks class-action status over phantom discounts at outlet stores.  She filed suit in March against AM Retail Group, which operates Bass stores.

So-called “phantom discounts” are designed to use a psychological effect known as “framing” to trick consumers into thinking they are getting a steal of a deal…when perhaps it’s the store that’s stealing.  Increasingly, courts and regulators are scrutinizing these kinds of pricing tactics, and you should, too.

“Consumers have a reasonable expectation to an honest marketplace.  That’s why we have laws prohibiting deceptive and misleading advertising,” Jeff Carton, DaCorta’s lawyer, tells me.  “If a retailer falsely conveys the impression that an item is worth more than it’s being sold for, than consumers are being misled.”

A chief concept of Gotcha Capitalism is what I call the “Death of the Price Tag.”  Price transparency is critical for the functioning of a market economy, and when prices become opaque or distorted, markets break. Today, many people are (intentionally) confused by the real price of cable television, or an airplane ticket, or a car repair, or even a house. The death of the price tag means consumers can’t comparison shop, and it means businesses that perfect the art of misleading consumers succeed while businesses with the best products at the best prices fail.  That’s Gotcha Capitalism.

As you might imagine, I’m interested in any effort to restore integrity to price tags. One promising trend is a series of regulatory actions and lawsuits around this problem of “comparison” price tags. For years, retailers have tried to convince shoppers that they are getting a steep discount off an “original” price — for example, “$24.99 SALE vs. $79.99 ORIGINAL.”  That’s fine, except when the original price never existed. Then, it’s an unfair and deceptive trade practice, many courts have recognized.  Slowly, retailers are coming around to this notion. You might have noticed, for example, that Macys.com now includes the odd-sounding “savings not based on actual sales” next to some prices on its site.

Outlet stores take this problem a bit further.   Since outlets have exploded in popularity, sellers have begun making separate (cheaper) lines of clothing that are sold only in outlets.  But unless this is made clear to consumers, many mistakenly believe they are buying items that are equal to goods sold in standard retail stores. That’s also a price tag distortion, because consumers are then led to make incorrect comparisons when trying to make purchase decisions. Regulators and courts are starting to side with this point of view, also. Back in 2014, four members of Congress asked the FTC to investigate the practice.

Since then, Michael Kors paid $5 million to settle a class action lawsuit alleging the practice.

Other lawsuits have followed suit, including the case filed last month in New York against Bass.

“This action seeks to redress the unfair and deceptive sales practices by which (Bass) is misleading consumers into believing they are receiving steep discounts on certain merchandise sold through its factory outlet stores….” the lawsuit says. “In reality… the majority of the merchandise sold at its factory outlet stores is manufactured specifically for sale at the outlet, and is never offered at the Comparison price. Accordingly, there is, in fact, no discount whatsoever.”

I tried to get Bass’ point of view for this story, but e-mails to AM Retail and the firm’s lawyer went unanswered.

In the request for the FTC examination, members of Congress wrote that 85 percent of merchandise sold in outlet stores isn’t what you’d expect: last-year’s fashioned, or blemished items. Instead, it’s made exclusively for the outlet.

The real deception involves giving consumers the impression that items sold at an outlet store are equal to items sold at retail stores — consumers logically, or at least emotionally, identify with the brand rather than the sign above the physical location.  And that’s deceptive, the lawsuit claims.

“In doing so, Bass, and other stores like it, deceptively advertise their products at outlet stores by displaying the sale price alongside a purportedly former or original Comparison Price, creating the impression of a bargain,” the lawsuit says. “In fact, this illusion of a discount is wholly false and deceptive.”

Back to psychology. A host of studies have shown that price exaggeration techniques like “framing” or “anchoring” work on casual consumers and professionals alike. One study proved that realtors asked to assess the price of a house could easily be manipulated by the presence of a “list price.”   When asked to estimate the real value of a home listed at $119,000, the average “appraisal” was $114,000. When the list price was changed to $149,000, and all else remained the same, the guesses rose to an average of $128,700. In other words, simply by changing the first price suggestion made agents raise their perceived value of a home by more than $14,000.

In other words, we can’t just say, “Let the buyer beware.”  These techniques are known to work, and often require intentionally falsified information. Stores know this, and they know lawyers and regulators are watching. But for now, the practice continues in many places. Why?

“Because until consumers like Ms. DaCorta have the courage to stand up and push back, retailers will continue to prey upon their customers with sales techniques that are effective, albeit unscrupulous,” said Carton, a partner at Denlea & Carton LLP. The firm frequently files class-action suits aimed at getting redress for consumers. “Retailers know the psyche of the average reasonable consumer and the desire to get value for one’s purchase, and they pander to it.  Until consumers hold retailers accountable for the basis on which they use comparative pricing, there’s no incentive for retailers to stop.”

While courts and regulators are sorting out the “compare to” or “original” price tag problem, consumers should be suspicious of double-price tags in all stores — but particularly in outlet malls.

“Consumers should be wary of whether they’re actually receiving a bargain,” Carton said. “They should ask whether the items they’re purchasing were manufactured specifically for the outlet store, and whether the same item is sold elsewhere.  And when there’s a comparison price listed, they should ask more details about the basis on which that comparison is being made.”

Or better yet — mentally (or physically, if you must) simply block out the comparison price listed on any price tag. If the item is worth it to you on its own, at the actual price you’ll pay, buy it. If not, put it down and back away.

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The wide attack surface of a hospital or health care facility (SecurityEvaluators.com)

The wide attack surface of a hospital or health care facility (SecurityEvaluators.com)

A few years ago, my long-time, elderly, live-alone neighbor was taken away in an ambulance.  I wasn’t home and heard about it second-hand.  At first, I had no idea how serious it was or even where he was taken, but I was really concerned. So I started calling local hospitals to ask if he’d been admitted.  You can probably guess how that worked out for me.

I was stonewalled at every turn. Even when I said might be the only one who would call about him, that I was concerned he had no nearby next of kin, I got nowhere. I was fully HIPAA’d out.

Eventually, I talked to local police who tipped me off that he had been brought to a nearby hospital. I called them again.

“Not to be morbid, but can I even confirm that he’s still alive?” I pleaded.

“Due to patient privacy, we cannot divulge anything,” I was told.

Now you probably know I care about privacy as much as the next person, but if my friend and neighbor was dying in a hospital bed, I was Hell bent to make sure he didn’t die without knowing at least someone cared about him. And this seemed cruel to me.

I called a few more times.  I finally lucked out and got to someone who, from her voice, sounded quite a bit older. Maybe even a volunteer. She heard me out.

“You didn’t hear it from me,” I recall her saying. “But he’s recovering from brain surgery. He probably had a stroke.”

I’m happy to tell you that I went to see my neighbor a few times during the next several weeks, and after a long recovery, he’s actually doing really well.

I tell you all this because I am worried that situations like these are really helping hackers.

Perhaps you’ve heard about the rash of hospital and health care systems being attacked by ransomware.  In the Washington D.C. area, a chain named MedStar was reduced to performing nearly all tasks on paper by a virus that locked all its files and demanded payment to unlock them.  The problem is so serious that U.S. and Canadian authorities jointly issued a warning about ransomware on March 31, calling attention to attacks on hospitals.

What does this have to do with HIPAA, or my neighbor’s stroke?  It shows we are worrying about the wrong things.

All of us have been HIPAA’d at some point.  We’ve felt the wrath of the Health Insurance Portability and Accountability Act, enacted in 1996.  Want a yes or no answer to a simple question from your doctor?  You can’t get an email from her or him. You have to login to a server that will probably reject the first five passwords you enter and then force you to a reset page, and half the time you’ll give up before you find out that, yes, you should take that pill with food.

There’s a saying in the geek world that “compliance is a bad word in security.”    Walk into any health care facility and you’ll immediately get the sense that everyone from doctors to nurses to cleaning staff are TERRIFIED to violate HIPAA.  On the other hand, I’ve been told by someone who has worked on a recent hospital attack, health facilities routinely are five or even 10 years behind on installing security patches.

Geoff Gentry, a security analyst with Independent Security Evaluators, puts it this way:

“We are defending the wrong asset,” he told me. “We are defending patient records instead of patient health.”

If someone steals a patient record, sure, they can do damage. They can perhaps mess up a patient’s credit report. But if someone hacks and alters a patient record, the consequences can be much more dire.

“It could be life or death,” he said.

Gentry was part of a team from Independent Security Evaluators that reviewed hospital security at a set of facilities three months ago in the Baltimore/Washington area.  The timing couldn’t have been better.  The message couldn’t be more important.

“For almost two decades, HIPAA has been ineffective at protecting patient privacy, and instead has created a system of confusion, fear, and busy work that has cost the industry billions. Punitive measures for compliance failures should not disincentivize the security process, and healthcare organizations should be rewarded for proactive security work that protects patient health and privacy,” the report says. “(HIPAA has) not been successful in curtailing the rise of successful attacks aimed at compromising patient records, as can be seen in the year over year increase in successful attacks. This is no surprise however, since compliance rarely succeeds at addressing anything more than the lowest bar of adversary faced, and so long as more and better adversaries come on to the scene, these attempts will continue to fail.”

In the test, Independent Security Evaluators found issues that ran the gamut from unpatched systems to critical hospital computers left on, and logged in, when patients are left alone in examination rooms.  A typical problem: Aging computers designated for a single task that are left untouched for months or even years, missing critical security updates.

Larry Ponemon, who runs a privacy consulting firm, was an adviser on that project.  He assessment is equally as blunt.

“Being HIPAA compliant has become almost like a religion,” he says. “The reality is that being compliant with
HIPAA doens’t get you really far.”

To be clear:  The report didn’t uncover lazy IT workers playing video games while IT infrastructure crumbles around them. Nor did it find uncaring doctors, nurses, or even administrators. To the contrary, if found haggard security professionals desperately trying to keep up with security issues, and generally falling hopelessly behind as their attention is constantly redirected to paranoia over compliance issues.

“A lot of companies have made poor investment decisions in security. They are doing things that are not diminishing their risk,” Ponemon, who runs The Ponemon Institute, said. (NOTE: Larry Ponemon and I have a joint project on privacy issues, a newsletter called The Ponemon Sullivan Privacy Report.)

Hackers are devoted copycats, so we know more attacks on hospitals are coming. At the moment, these attacks seem to have been limited to administrative systems, and the impacted health care facilities say patient care was unaffected. (I did interview a D.C.-area patient who said two doctors were unable to share his patient files, leading to unnecessary delay and expense).

It’s easy to imagine far worse outcomes, however.  Gentry speculated that hackers could attack a specific patient and extort him or her.  Ponemon talked about attacks on pacemakers or other digitally-connected devices that control patient health.

“These sound like they are science fiction, but hospitals are part of the Internet of Things,” he said.  “And there doesn’t seem to be a plan to manage the security risk.”

The plan, Gentry says, has to involve righting the regulatory ship and letting hospitals and health care facilities worry about the right things.

“We need to take a lot of this bandwidth we are appropriating to compliance and use that bandwidth on security and patient health,” he said.

And we’d better start soon. Because we’ve given the bad guys a pretty sizable head start while we were distracted by Herculean efforts to protect my neighbor from me.
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