News Briefs: Study: African-Americans Pay Significantly More On Auto Loans
African-American consumers pay significantly higher rates on auto loans on average than do other Americans, according to a new survey by the Consumer Federation of America (CFA).
The CFA said it found that African-Americans pay an average auto loan rate of 7.5% compared to 6% for most borrowers. On a six-year, $20,000 car loan, this 1.5 percentage point difference would add up to about $900 in additional interest payments, the CFA said.
CFA is urging African-American consumers to take steps to reduce this interest gap, which it says "reflects factors under their control as well as hard-to-control factors related to credit risk."
"Most importantly, car buyers need to make certain that they are paying an annual percentage rate related to their credit risk, not one marked up by the car dealer or other loan seller above the risk-related 'buy rate'," CFA said. The group urged African-Americans to talk to their bank or credit union first about financing before taking the dealer financing.
The difference in auto loan rates between African-Americans and other Americans was revealed by an extensive survey, conducted by the Opinion Research Corporation in November 2005, of more than 2,000 adult Americans.
The survey also revealed that the proportion of African-Americans with auto loans (29%) is nearly as high as the proportion of other Americans with these loans (33%).