Abstract
Previous research has shown that people of color pay more for their car loans than similarly situated whites when financing their loan through a car dealer. Likewise, current investigations from federal regulars have found racial and ethnic disparities in interest rate pricing, even when controlling for risk measures. Theoretically, we would expect strong negotiation and comparison shopping to be a viable remedy for disparate impact in these cases. However, analysis from a survey of recent car buyers shows that African Americans and Latinos negotiate and comparison shop on their car loans just as much as Whites, if not more so. Consumers of color are also more likely to hear misleading information about their loan from a car dealer, as well as more likely to purchase multiple "add-on" products which correlate with greater loan delinquency.
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