Posted on 05/08/2007 6:43:29 PM PDT by Graybeard58
Blacks have been charged higher auto loan rates than other auto buyers, federal research says. But the gap in loan rates could narrow, and possibly disappear, as the result of recently concluded lawsuits.
Blacks paid a typical auto loan rate of 7 percent for new cars, compared with 5 percent for whites in 2004, according to a consumer organization's analysis of the Federal Reserve Survey of Consumer Finances. That was the most recent survey available.
And blacks were more likely than auto buyers in general to have auto loan rates higher than 15 percent. For used car loans, 27 percent of blacks who buy cars were charged interest rates of 15 percent or more. Blacks were three times as likely as whites -- 27 percent to 9 percent -- to have auto loan rates at least that high, according to the report released Monday.
Hispanics were paying a typical rate of 5.5 percent for new car loans, while 19 percent of Hispanics had loans for used cars over 15 percent, the analysis found.
Lenders' suggested quote rates are based largely on the buyer's credit history, but auto dealers often raise the rate higher than that risk-related rate without discussing the rate with the customer, consumer advocates said. And they question the causes of those rate differences.
"It's hard to believe that any differences in credit worthiness explain all of these rate gaps," said Stephen Brobeck, executive director of the Consumer Federation of America. "They size you up, the car salesmen and finance and interest guys. They must think African-Americans are more vulnerable to a markup."
But a series of legal actions against auto finance firms seeking fair treatment for minorities could help solve that problem.
"We had 11 lawsuits, the last settled last month," said Stuart Rossman of the National Consumer Law Center. "We reached a settlement with each of the finance firms. Our cases involved discrimination. We believe the terms of the settlements will eliminate discrimination."
The first of the lawsuits was filed in 1998 in Nashville, Tenn., against General Motors Acceptance Corp. and was settled in 2004. The last settlement became final in April. The effects of those legal actions may not be known for some time.
The National Auto Dealers Association questioned what accounts for the rate differences, but encouraged auto buyers to do their homework before going to buy a car.
"The question that still is unanswered is why," said David Hyatt, a spokesman for the dealer's association. "People should do their homework and shop around. It speeds up the transaction, makes for a smoother transaction and is more likely to result in a satisfied buyer."
Hyatt said an organization supported by the auto dealers, Americans Well Informed on Automobile Retailing Economics, or AWARE, offers tips to potential car buyers.
Chris Stinebert, president and chief executive of the American Financial Services Association, said his group wants to educate consumers.
"AFSA and its members believe there is no place for discrimination in the vehicle financing system," he said.
The lawsuit settlements against auto finance companies call for caps on dealer markups, opportunities for blacks and Hispanics to get loans with no markups within the next few years, more information about interest rate terms and consumer education for minorities.
"The lower markup caps have leveled the playing field," Rossman said.
The survey of 4,519, including 605 blacks, was analyzed by Catherine Montalto, a consumer specialist at Ohio State University for the Consumer Federation of America. The survey was conducted between May and December of 2004.
If it is buy here/pay here, a dealer can charge more interest based on what HE thinks the risks are. He is not asking for a credit history. And they do not want to present it. He is doing the buyer a favor IMO.
As for dealers who arrange financing though lenders, they do not care what the rate is, they just want to sell the car. And the large lenders base rates on credit score.
I have 19 years financing cars under my belt. Wherever I have worked credit history is the sole reason for higher rates. What the heck do they want us to do add a 100 points to their beacon score just because they are black?
Oh yea...we do that for college admissions. I see where this is going.
Let me guess, credit scoring is racist too?
Anyone that would buy a $2k Hyundai and put $4K worth of rims on it, deserves to pay a higher rate!
LOL Breezy!!!
My wife is spanish. My kids are half spanish. If we will get 100 points on the score, we are going for a new equity line baby!!! Under my 8 year old HISPANIC sons name!! lol
HAHAHAHA!!!
One of the funniest posts I have ever read. :)
I hope I didn’t just get myself banned.
How does a redneck double the value of his pickup truck? Install a car phone.
Same principle.
Nice!
“Auto rates hit blacks harder”
“End of the world coming soon: Women and Children Hardest Hit.”
Having been a partner in an auto dealership, I agree with 100% of what you said.
It's even harder to believe that Mr. Brobeck would make such an assertion without analyzing the data.
On second thought, I guess that's what we should expect from these people who claim to represent consumers without ever bothering to find out what we think.
LOL
White ,black, purple or red if they let me hold a couple of point I love em’...
If the rates are too high, someone will come along offering lower rates and make a fortune.
If women are paid less than men, someone will come along and hire women and make a fortune.
If whites can really play cornerback in the NFL, someone will draft one and win the Super Bowl.
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