11/14/2023 0 Comments Mortgage defaults by racePercentage points-which results in nearly $1,400 in additional interest over the lifetime of a typical auto loanįrom the 2008–13 data set I used for my paper. That Black borrowers disproportionately pay what is generally the highest allowable interest rate markup-2.0 Thousands-of extra dollars in loan payments relative to their White counterparts. This disparity in rates results in Black, Hispanic, and Asian borrowers often paying hundreds-or sometimes even Higher interest rates than those for non-Hispanic White borrowers. Loans obtained in this way-which are called “indirect” auto loans-for Black, Hispanic, and Asian borrowers have Strong evidence of racial and ethnic discrimination when auto financing is arranged through auto dealers: Auto In my recent paper using Consumer Financial Protection Bureau (CFPB) data on millions of auto loans, I found The auto loan market could be particularly harmful to Black and Hispanic communities. Roughly 60% of Black households andĪbout half of Hispanic households in the United States are LMI households, so racial discrimination in Wealth and financial well-being of LMI households. In the costs of auto loans by demographic characteristics could have significant and long-lasting effects on the 5 Given the role autos play for many LMI households, any disparities Households’ balance sheets, autos frequently represent the largest source of wealth for these households. In addition to playing an outsized role on the debt side of LMI This means not only that auto loans make up a large portion of the debt carriedīy LMI households at any point in time, but also that auto loans’ cumulative impact on these households is Because the average time a household owns a particularĬar is just six years, 4 many people will take out several car loans Lower for people in these households, an auto loan is often the largest loan an LMI household will ever take outĪnd may be its primary connection to financial markets. Since homeownership and college attendance rates are Role in the financial lives of LMI households. Vehicles, along with the loans used to obtain them, play an outsized Vehicles, along with the loans used to obtain them, play an outsized role in the 3 In such neighborhoods or towns, vehicles enable their residents toĪccess not only places of employment, but also places to get food, medical care, and other resources that are 2 Owning a car isĮspecially important in communities where most households have low and moderate incomes (LMI households). Traveled around 31 miles in their vehicle each day. 1 Even during the Covid-19 pandemic, the average driver in the United States Vehicle, and more than 92% of commuters rely on cars to get to work. In the United States, cars are both ubiquitous and essential: More than 90% of U.S.
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