CFA: African-Americans Pay Higher Auto Loan Rates, but Can Take Steps to Reduce Expense
WASHINGTON - The Consumer Federation of America has released the results of a survey it did which show African-Americans pay, on average, a significantly higher annual percentage rate on auto loans than do other Americans - 7.5% compared to 6.0%. But the CFA says African-Americans can also take steps to reduce this interest gap which the association says "reflects factors under their control as well as hard-to-control factors related to credit risk." The CFA estimates that on a six-year, $20,000 car loan the 1.5% percentage point difference would add up to about $900 in additional interest payments. The most important action car buyers can take, says the CFA, is to call their credit union or bank for an auto loan quote before talking about financing with a dealer. Also important is for car buyers to make sure they're paying an annual percentage rate related to their credit risk, not one that's marked up by the car dealer or other loan seller above the risk-related "buy rate." CFA Executive Director Stephen Brobeck said a simple call by the prospective car buyer to their credit union or bank for a rate quote before they go to the dealership could easily save the consumer more than $1,000 in interest costs on their auto loan.