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YOUR BOTTOM LINE
What Washington is Doing to Help the Auto Industry and What's In It for You; New Tax Benefit Could Put Money in Your Pocket; How to Land Bargain Basement Priced Homes
Aired April 4, 2009 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CNN HOST: Hello. I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money.
What Washington is doing to help the auto industry and what's in it for you. Plus, a new tax benefit that just may put some money in your pocket. Also, a look at America's housing market. How to land a bargain basement priced homes you've heard so much about. YOUR BOTTOM LINE starts right now.
Auto sales down 35 percent across the board from last year, but an uptick from February suggests the worst may be behind us. So where exactly does that leave the troubled industry and more importantly what does it mean for you?
Joining us here, Peter Valdes-Dapena, he's from CNNmoney.com and Phil Reed from Edmonds.com, two great Web sites.
But I'm going to start, guys by putting you on the spot a little bit. You know, we look at this auto industry and I lived for years in the Midwest, I understand the loyalty to these brands, but look, two of the major players here, at the brink of bankruptcy. Why would I buy one of these cars right now and, Phil Reed, would you buy one of these cars, right now?
PHIL REED, EDMONDS.COM: Well, I personally don't think I would, but I know that many people still are buying and the reason is because not all buyers are created equally. Basically, there are some real bargain hunters in the marketplace, right now, and when they smell blood in the water, they're looking for an unprecedented deal. There may be vehicles that are now within their reach which previously were not because of the incentives and discounts.
WILLIS: Good point.
All right, well, you answer the question as well, here. Because, I think a lot of people out there are thinking, wow, these companies are so troubled?
PETER VALDES-DAPENA, CNNMONEY.COM: Right. Well, first you have to consider the fact it's not like the government isn't doing anything. Something is happening, the government made statements that they feel, for example that GM has a clear path to viability, they need help to get there and the government can help them get there. So, they have some support. And when Phil talk answer bargain hunters, what that means is that the risk, like we talked about stock, the risk being priced into a stock, the risk of something happening to one of these companies is sort of priced into the cars right now.
WILLIS: All right, but I got to put you on the spot, here. One word answer, would you buy?
VALDES-DAPENA: Would I buy? Yes. There are domestic cars I would buy, right now.
WILLIS: All right, well that's interesting to hear you guys respond to that. I want to get to some of these deals, some of the work the government's doing try to goose this industry. Phil, start with you on the government warranty. Let's talk a little about that. What is the government saying they're going to do to stand behind thee these cars?
REED: Well, during the reconstruction process where they're trying to rebuild the industry, they're saying that if you purchase during this time, your warranty will continue to be in effect and be honored even if the car companies go into bankruptcy or go out of business. So, that definitely removes one the major concerns that consumers have, which is, can I get parts and service, will my warranty still be honored? So, this is a very powerful thing, it's a consideration that they've removed from the buying paradigm at this point.
WILLIS: All right. So, you will have a warranty, obviously, the government is going to stand behind that. But Peter, let's talk about incentives now, because the incentives are pretty attractive.
VALDES-DAPENA: Well, the incentives are pretty attractive from a pricing standpoint. I mean, thousands of dollars in rebates, the problem is these kind of incentives weren't working because people were just too scared. I don't care if you give me $4,000 off, I don't want that monthly payment, forget it.
So, what -- Hyundai did it first and now GM and Ford have done it, too, they've got incentives out there that, if you lose your job or lose your income, they will make payments for you, and so this will not impact your credit score should you lose your job. That should help remove concerns that buyers have about their own position in this current economy.
WILLIS: Phil, you know, we've seen some of this before, where these auto companies will say, you know, hey, you know, we'll be good for, you know, a month, two months, in this case three to nine months' worth of payments. Does that really working in at marketplace? Do buyers really respond to that?
REED: Yes, well, obviously, Hyundai was the one that pioneered this late last year and at the time I thought it was such a good idea, I thought, well why isn't everybody jumping in immediately? Because -- well, they're one of the few people that have -- one of the few manufacturers that have shown some real life in this market and most people believe it's because of this program. And then, also, I need to add, too, that apparently it's worked for them, because not that many have come back in think cars, so they haven't taken a big loss as a result of this.
WILLIS: Interesting. All right, you know, it's in interesting thing for people who are worried about possibly losing that job.
Peter, I'm going to move to negotiating now in the marketplace. It seems to me, boy, if you were a buyer, the world is your oyster. What's the one thing people should know about negotiating for that car?
VALDES-DAPENA: Well, right now, in terms, if you're going to a Chevrolet dealer a tough negotiation means basically showing up. I mean, any customer that comes in the door right now, they're going to want to make a deal with you if you are ready to buy a car. If you go to, let's say, one of the competing Asian manufacturers, remember, you know, they know that -- let them know you're looking at a Chevrolet or one of these other cars that heavily discounted with these incentives and use that to your advantage.
Frankly, there's a weak car market out there, not just for domestic brands, for Asian brands, European cars, everything. So, right now you're in a great position. If you just show up and let them know I'm not looking, I'm ready to buy.
WILLIS: I love that. Just show up. All right, the bottom line here, if you're in the market for a new car, negotiate, there's never a better time and head to Edmonds.com to arm yourself with critical data, like how much the average buyer pays for a particular make and model, you'll be surprised how different it is from the sticker price.
And for the latest on the auto industry or any bit of the day's news that affects YOUR BOTTOM LINE, logon to CNNmoney.com.
Don't let the deadline at tax time cost you, how to prepare the best return. We're answering your tax questions, next.
WILLIS: Your boss may be giving you a raise, courtesy of President Obama. Employers were asked to put the president's "Making Work Pay Tax Credit" into affect this week and well, you're probably getting money in hand, right now. Here to tell us who qualifies for the credit and how much you'll be getting is CNNmoney.com senior writer, Jeanne Sahadi.
Jeanne, good to see you.
JEANNE SAHADI, CNNMONEY.COM: Good to see you.
WILLIS: I want to start by telling people what a tax credit is. This is a good thing, it's a dollar for dollar reduction in your taxes. You know, a deduction only lowers the amount of money that you have to pay taxes on, so this is a much better thing, and people are getting it right now. SAHADI: Right.
WILLIS: Let's talk about that.
SAHADI: You see, now, in April, most people will be seeing extra money in their paychecks, if they haven't already started seeing it. A lot of employers did this actually before April 1. You're going to be getting something like $10 to $15 a paycheck, if you're a single person and qualify for this credit or somewhere between $15 and $20 if you're a married couple filing jointly, that's on a weekly basis.
WILLIS: That's $400 a year.
SAHADI: Four-hundred dollars a year, $800 for a couple.
WILLIS: All right, we're looking at some dough, here. It's a good thing, but it's not for everybody. Let's talk about who actually qualifies for this.
SAHADI: OK, you have to have a job or your spouse has to have a job, one you has got to be working. You have to meet income requirements. If you're a single person, your modified adjusted gross income has to be $75,000 or less, to get the full credit, or between $75,000 and $95,000 for a partial credit. For couples it's -- the cutoff for the full credit is $150,000 and it's $150,000 to $190,000 to get a partial credit.
WILLIS: So, obviously income phase outs here and not everybody qualifies. But if you're on your own, $75,000 or less, that's your adjusted gross income, you can get this dough.
Let's talk about who doesn't qualify. Obviously, if you have to be employed to get it, if you're unemployed you don't get it.
SAHADI: Right. The people who are working who are not going to get are people who can be claimed as dependents on someone else's tax returns, so that 22-year-old still living with mom and dad who's still claiming them, they won't be eligible for this credit.
WILLIS: But senior, too, right?
SAHADI: Seniors who are qualified for social security benefits, pension benefits, veterans comp they won't getting it but there is, they may be getting an emergency one-time payment of $250 which will be paid out by mid-June. You have to -- there's a certain date qualification as to when you get the benefits.
WILLIS: All right, now, you have something interesting to say about how not to over pay.
SAHADI: Well, you could be paid more credit than you deserve or that you're entitled to, because of the way they set up the withholding table. So, if you have a second source of income, in investments, another job, if your spouse works, you might want to check your W-4 withholding, your number of allowances and you might want to change it now, because if you don't, you may be paid more credit than you are entitled to and then you have to pay it back, the extra part, you have to pay it back on your 2009 return. So, that's just a hassle, it's not...
WILLIS: Devil's in the details, as also, Jeanne. Thank you for that.
And we should remind people that even if you work for yourself, you can take advantage of this tax credit if you have the right income.
April 15 is less than two weeks away. Have you done your taxes yet? Whether you're wondering about extensions, deductions or refunds, you sent your tax questions, joining us now with answers is Roni Deutch.
RONI LYNN DEUTCH, TAX ATTORNEY, AUTHOR: Thank you for having me, Gerri.
WILLIS: Now, I should say she's a tax attorney and the author of "The Tax Lady's Guide to Beating the IRS." so we have a question for you. Listen to this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Hi, Gerri. I have a question for you. I know April 15th is rolling around and I'm just wondering, for how long can I get an extension to file my taxes?
(END VIDEO CLIP)
WILLIS: Great question. All right, Roni, what do you say?
DEUTCH: Here's the good news, millions of taxpayers are not ready on April 15 to file their taxes. Don't worry about it. You're going it file a form 4868 with the IRS, and you're going to get a six- month extension to file your taxes. What does that mean?
On October 15, your taxes must be filed, but this is what everybody needs to know, Gerri, even though you get that extension, from April 15 to October 15, if you owe the IRS and, let's face it, millions of people will owe the IRS, you still have to pay the IRS. So when you file that 48...
WILLIS: Doesn't get you off the hook of paying, now, does it? Even if you extend, you got to pay the tax bill.
Let's move to Gayle's e-mail. "One of my daughters is 24-years- old and a full time student in a doctoral program. Can't she still be claimed as a dependent taxes? She's on our health insurance and will be until she turns 26."
Roni, what do you say about that? Complicated question, you got all kinds of dependents out there, students, adults, senior citizens who are on their kids' taxes. How do you handle that?
DEUTCH: Yeah, first of all, congratulations on getting your doctoral. Let's talk about how this works. Yes, that is her daughter, she's only 24-years-old, she's going to school full time. So, yes, the parents are going to be able to claim the $3,500, add the exemption for that daughter. So again, good news. And there's many people, Gerri, that are supporting their parents, right now. So, good news, we got a lot of people that are going to be able to claim children, parents, et cetera for that $3,500 deduction.
WILLIS: And so, the rule, though, is, Roni, is that they have to be dependent on you financially, is that the way it works?
DEUTCH: Well, really there's a qualifying child test, Gerri. Is it your child? Are you supporting them? Are they a full time student? Do they live with you some of the year? Again, there's a lot of different tests, but based on what that question was, Gerri, it sounds like it's a slam-dunk and she would qualify for that $3,500 amount.
WILLIS: All right, we got another video question here. Listen to this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Hey, Gerri. I was just wondering if there's any special tax exemptions or credits for students who just graduated college and just got their first job.
(END VIDEO CLIP)
WILLIS: Students asking for help, you know? This happens a lot and particularly in this economy. What do you have for him, Roni?
DEUTCH: Gerri, first of all, students need to know this -- most of us got student loans. Here's where your help is going to be found, $2,500 you get to deduct in interest on those student loan. What else do you need to know, students? Hey, you're going get a job, congratulations, and you may have to move to get that job. Moving deduction, you get to claim that. So, again if you're moving to get the job or you've got student loans, you bet you're going to qualify for some tax help from the IRS.
WILLIS: All right, Roni, thank you for that. Great information, fantastic answers, well, to really difficult questions. Appreciate that.
DEUTCH: Thank you so much.
WILLIS: Buying a house is more affordable than ever. We'll show you how to take advantage of record-low mortgage rates, and snag that dream home.
WILLIS: Well, the housing picture looks either grim or great, depending on whether you're trying to sell your home or buy one. Prices continue to slide; they're not at levels not seen since late 2003, bad for sellers, good for buyers. But now we're really going to look at buying opportunities and how locking in those great rates and those great opportunities. Here's Dani Babb, author of "The Accidental Landlord."
All right Dani, you've got some great information on where to shop and how to look. But this is really an unprecedented opportunity here, right?
DANI BABB, AUTHOR: Oh my god, it's amazing. They have rates under five percent for most banks.
BABB: And it's not even that difficult to qualify for those. You can put three percent down. What's happening is the banks are lending like crazy on loans that the government is willing to buy, which is anything above $417,000 or $749,000, depending where you live.
WILLIS: OK, so let's talk about your list here, because I think they're critical. You have a list of where to buy. Places that are good, that are cheap. Where you can actually purchase, say, a second home or a vacation home?
BABB: Yeah, and it depends on how you want to proceed in the future. So, do you want to be stable or do you want to make -- potentially make a lot of money?
WILLIS: Let's talk about vacation homes, here. So, we're looking in markets where people typically buy second homes and we've seen huge price cuts, in places like Miami, for example.
BABB: Miami, south Florida. Las Vegas, Arizona. Southern California, even northern California, the Sunbelt states and places where boomers are moving in where hopefully you're not going to lose much going forward, which is really important.
WILLIS: And those prices down 40 percent.
BABB: Forty, 50, 60 percent sometimes in south Florida and if you can get a foreclosure on top of that, you can take another 10 to 20 percent off of that price. The time to buy is amazing. If you're a first-time home buyers, you're going to get that $8,000 credit if you hold it for three years, another huge incentive. Lots of great deals.
WILLIS: Well, given the fact you brought up first-time home buyers, let's talk about places for stability, then, because, those folks are looking at different markets.
BABB: Yeah, you don't want to jump into your first home and see it drop 20 percent in three years. You might not be used to that. So, first we have in Idaho, people are moving from Colorado to Idaho. Now, the reason for that move is not quite clear yet, but we know that's happening, so Idaho's pretty stable. Texas has not lost in almost all counties, anything over the last several years, in fact, it's actually been bumped up. So, you have Killeen, Austin, Round Rock, most of the Dallas suburbs are doing really well.
And then we also have places where green energy is moving in, northern California, Oregon, Washington doing very well, and then we have some places outside of Richmond, Virginia that are doing very well.
WILLIS: All right, steering clear, you have a list of places that you say don't buy there. One of them is Ft. Meyers, Florida. I thought Florida is on sale. Why wouldn't I buy there?
BABB: It is, it's a fires sale in Florida, but there's some concerns about Ft. Meyers because a log of it is military driven and the people are getting moved around so frequently, a lot of them are going into foreclosure, which is a problem, very high foreclosure rate. We have also seen over the last three quarters, prices drop off more than the rest of the state, which is a concern. Riverside, San Marino County, California, stay away from it. People can move into urban areas for cheaper prices and be close to work, so that's another reason you don't want to there.
WILLIS: And of course, we talked about Detroit, we're talking about Buffalo because these are places with economic problems that aren't getting solved quickly. You could really find yourself in a bad situation.
Let's talk about negotiating now, because it's an entirely different scenario. If you are a buyer, what can I get? What can I push for?
BABB: Well, first of all, you should always push to have your closing costs covered by the seller. Now, it's going to depend highly on how many other people want that house that you're looking at buying and how badly you want it. If you've got a lot of people in there, you might not want to push too hard. But, in general, closing costs paid for by the seller.
WILLIS: Closing cost you thousands of dollars.
BABB: Thousands of dollars, but generally, the buyer would pay for that, but in the market we are seeing it split or the seller pays. Have the seller consider buying down your rate using points, so it might cost you $1,000, $2,000 to get a better rate, have the seller consider buying that down. We used to split title and escrow 50/50, have the seller pay.
WILLIS: Not anymore.
Hey, you know, I've got a great idea. What if I go into that house and the kitchen is old-fashioned, it looks like hell, can I get them to pony up a little dough?
BABB: Another great idea, asking for cash back at close to do some remodeling and also asking the realtor that's represent that particular home, to maybe throw some cash back your way at the end of close, as well, for you and for the seller.
WILLIS: I love that idea. Dani, great ideas, thank you so much. I hope you're TiVoing this show because you have to keep up and it can be hard, but great information today on that.
The bottom line here, though, as a buyer, you have leverage in this market and everything is negotiable. Ask your seller for closing costs, any points on the loan. Look, you can even ask for money to remodel like maybe a potion of the cost for your brand new kitchen. Buyers have the power.
Commuting by car, train or bus takes its toll on the environment and on your wallet. Next, a green alternative that will not only save you money, it can get you in shape.
WILLIS: Some people ride bikes for lots of reasons, for their health, to save money, or even the environment. Whatever reason bicycles are in demand and that's good news for retailers.
CNN business correspondent, Stephanie Elam, now with the bright side.
STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT (voice-over): Think bicycles are child's play? Think again. In this economy, they're actually good business. Just ask Marty Epstein owner of three Marty's Reliable Cycle Shops in northern New Jersey.
MARTY EPSTEIN, MARTY'S RELIABLE CYCLE SHOPS: January's numbers were right on the mark from the previous January and so far February is working out really well.
ELAM: Marty is not alone, 73 percent of bike retailers survey by advocacy group, Bikes Belong, said their bike sales were up last summer from a year earlier.
So for Marty, the soft economy is good. It drives people into his stores, some looking to save a few bucks by using less gas, while others are searching for ways to have fun with less money to play with.
EPSTEIN: And it's relatively inexpensive if you look at it from this scheme of everything else you can purchase. This year particularly, because it was a recession, maybe we won't sell the super high end bike, but maybe we'll sell maybe a little bit lower bike, and if we don't do that, then we'll fix somebody's older bike. So, we're a balance of selling new bikes, we're a balance of repairs, accessories.
ELAM (on camera): You decided to open up these bike shops in New Jersey -- northern New Jersey. Not Miami, not North Carolina, not California, not Arizona. So, how do you keep your numbers up when the weather, no matter what, is going to impact your sales?
EPSTEIN: Well, you have to push the business when the season is there. Everybody knows the northeast has a limited, you know, timeframe. We're totally 100 percent weather dependent. When early spring happens, we're busier early. When it slows down in the fall, we've already done enough business. It seems as though we have that busy season from April through September, October. And we can do enough business in that time frame to keep it going.
ELAM (voice-over): All the talk about bikes, I just had to take a ride.
EPSTEIN: This is why people like to ride, because it's an attainable sport. You can just hop on a bike and go for a ride And you're like, wow, I forgot how good this felt.
ELAM: It does feel good.
Stephanie Elam, CNN, Randolph, New Jersey.
WILLIS: OK, so maybe riding a bike to work isn't practical for you, another way to save the environment and some money is carpooling. Web sites like eRideShare.com and iCarpool.com can get you started.
And one word of advice, though, as you start, meet your co- carpoolers before your first ride to set the ground rules like how long you'll wait for people who are running late. And don't be embarrassed to ask about your co-carpooler's driving records. You're going to trust them behind the wheel of a car, after all. And don't forget to check in with your employers, some give financial incentive to workers who carpool.
OK, are you trying to save money for long-term goals like a new car or a new home or retirement? Log on anytime to CNN.com/helpdesk and click on the link to send us an iReport. We'd like to see you when we answer your questions.
As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week right here on CNN and you can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time. And you can hear much more about the impact of this week's news on your money on "YOUR MONEY" with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN.
Don't go anywhere, your top stories are next in the CNN "NEWSROOM." Have a great weekend.