Nearly 92% of American households rely on a personal vehicle for work, school and everyday life. But for many Black consumers, purchasing a vehicle comes with another burden: discriminatory and predatory lending practices that can leave borrowers paying thousands of dollars more than necessary.
According to Cox Automotive, the average price of a new vehicle reached $49,307 in May, while used vehicles averaged $25,918. For many buyers, financing is the only path to ownership, making loan terms just as important as the purchase price.
Studies continue to show that Black borrowers often pay more.
The National Fair Housing Alliance found that non-White shoppers were offered more expensive financing, 62.5%, than White shoppers with similar or worse credit. Likewise, a Century Foundation study concluded that Black, Hispanic and American Indian borrowers receive higher interest rates across every credit tier. Federal Reserve research found Black borrowers pay the highest average interest-rate markups, adding more than $3,000 in interest over the life of a typical auto loan.
A new report from the Center for Responsible Lending (CRL) argues that many borrowers fall behind not because they are unwilling to pay, but because dealers and lenders structure loans that are difficult to repay from the start. The report draws on focus groups with borrowers who had subprime credit scores, many of them Black, and found that inflated vehicle prices, excessive interest rates and costly add-on products often trap consumers in debt.
Researchers said high-pressure sales tactics, misleading claims about vehicle condition and expensive warranties or service contracts frequently obscure the true cost of a purchase. Dealer-arranged financing can also include hidden fees, interest-rate markups and loan terms that leave borrowers owing more than their vehicles are worth.
Nicole, a Minneapolis nonprofit employee earning less than $50,000 a year, said she needed a vehicle after separating from her husband. She financed a used vehicle with a 24% interest rate on a $19,000 loan. The dealer also added a $2,000 warranty and rolled over debt from a previous repossessed vehicle, increasing the amount she owed.
Soon after buying the vehicle, Nicole discovered major mechanical problems (including a failed engine, fuel pump and water pump) that had not been disclosed and were not fully covered by the warranty.
She now owes more than the vehicle is worth and has struggled to keep up with payments.
“You pay that and nothing ever changes,” Nicole said. “They’ve taken the truck. I pay when I’m past due, and they give it back. It’s a vicious cycle.”
The report also criticizes loan deferment programs, which many lenders market as temporary relief. While borrowers can skip payments, the unpaid balance continues to accrue interest, often increasing both the total amount owed and the length of the loan.
A Florida journalist identified only as ‘Isabelle’ described the experience.
“They charge daily interest, and you never catch up,” she said. “If you can borrow money from family or friends instead, it’s better than doing that.”
Another growing concern is the use of remote vehicle disabling technology, commonly known as ‘kill switches,’ which allows lenders to prevent vehicles from starting if payments fall behind.
One borrower, Monica, said her vehicle was disabled while she was driving.
“My car is jerking and I’m on the side of the road,” she said. “What if I had been on the freeway?”
The Center for Responsible Lending is urging the Federal Trade Commission, the Consumer Financial Protection Bureau and state governments to strengthen consumer protections, including limits on excessive interest rates and fees.
“This report shows how the advantages auto dealers and lenders have over consumers result in exploitation,” said Lucia Constantine, the report’s co-author and a senior researcher with CRL. “Our government must establish guard rails to protect consumers—like it did in the mortgage market.”
