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You can Get a Better Loan from Car Dealers—If You’re White

A recent research showed that white car buyers are more likely to get a better auto loan deal from a car dealership than minorities, even if they did not spend time and energy haggling for the best rate.

The survey, which is conducted for consumer group Center for Responsible Lending, revealed that minority borrowers received higher interest rates even if they negotiated.

It also showed that white borrowers, even without having to negotiate, paid only an average of 4.5 percent APR on their loans, while African-Americans and Latinos paid 6.2 percent and 6.9 percent, respectively.


About 32 percent of black borrowers and 39 percent of Latino borrowers negotiated their interest rates. Only 22 percent of white borrowers did the same.

However, CRL Senior Vice President Chris Kukla said that negotiation is not really an effective strategy to get a lower rate. The consumer group is advocating the ban of dealer markups which are charged on top of the auto loan interest rate. They serve as compensation for dealers that set up auto loans for consumers.

The survey, conducted in October 2012, is seen to fuel the ongoing debate about the alleged discriminatory lending practices against minorities in the auto industry.

But auto lenders and dealers still insist that the allegations lack evidence.

The survey was responded by 946 consumers who purchased a car in the past six years. They were asked to indicate their loan term, interest rate and whether they negotiated for a better rate.

The chief lobbyist of National Automobile Dealers Association, Bailey Wood, told the Wall Street Journal that the number of respondents is too small to draw any meaningful conclusion and that the survey did not ask for the respondents’ credit scores.

In compliance with the regulators’ investigation, NADA has proposed a set of voluntary guidelines for auto dealerships.

The American Financial Services Association, which represents auto lenders, has the same opinion about the survey and added that more than 15 million new vehicles were sold in 2013.

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