Itís lazy journalism to present a press release as news, but in this case Iím going to make an exception and quote heavily from a news release from the Consumer Federation of American entitled, ďHispanic Americans Pay Higher Used Car Loan Rates.Ē It irks me that such a large minority group is getting ripped off.
The news release, part of a campaign called ďHispanic America SavesĒ reports (download the pdf file):
ďOn 2004 loans for used car purchases, Hispanic-Americans paid a typical (median) rate of 9.0 percent compared to a typical rate of 7.5 percent for all borrowers.Ē
The difference in payments would be $3.54 a month ($120.89 vs. $124.43), or $169.68 over the life of a 48-month, $5000 loan, but it still strikes me as predatory. It also ultimately strikes me as bad business long term.
ďA far higher percentage of Latinos, than other Americans, were likely to pay used car loan rates of at least 15 percent -- 18.5 percent of Latino borrowers compared to only 9.2 percent of all Americans.Ē
This is the level when the serious difference starts to kick in. On that $5000 loan, borrowers would now pay $134.19 a month, or a total of $6679.20. Thatís an $876.48 difference, or an extra 17% profit because most of these predatory lenders are ďthe buy here/pay hereĒ used car lots.
ďDetailed research by academics earlier this decade of data on millions of auto loans revealed that minorities were far more likely to have their auto loan rates marked up than non-minorities. As a result, courts ordered most major car finance companies to cap rates, usually at 2-3 percentage points above the buy rates, and provide funds for minority-related consumer education.Ē
The problem is itís not the major car finance companies ripping off the poor and uneducated any more. Itís the smaller operations that know recent immigrants arenít going to have the means to fight back.
ďWeíve seen recent immigrants struggle with high-interest car loans, and in the worst cases it can decimate their finances. But at the same time, owning a car provides access to jobs and opportunities. Thatís why we work to provide consumers with advice and support on smart car buying, so buying a car can be a stepping stone to financial stability, not a barrier,Ē said Angelo Gonzalez, director of the Economic Independence project at the Cuban American National Council (CNC).
His comments come from a news release promoting America Saves , a nationwide campaign in which a broad coalition of nonprofit, corporate, and government groups helps individuals and families save and build wealth.
Do you share my disgust at these practices? Or am I being naÔve? I would welcome your comments and feedback below.
Photo © Getty Images