Study: Blacks pay more on auto loans
Whites reportedly are less likely to face markups by dealers.

By Mark Glover---Bee Auto Editor
Published 2:15 a.m. PDT Friday, October 3, 2003

African American auto buyers are more likely to be charged loan markups and to pay more for them than whites getting auto loans financed by General Motors Acceptance Corp., according to a report prepared for minorities suing GMAC.

GMAC officials declined to comment on the report, noting that they had not yet thoroughly reviewed it and that its author worked at the request of lawyers for plaintiffs alleging improper GMAC loan procedures.

The 100-page-plus report was prepared by Mark A. Cohen, a business professor with the Owen Graduate School of Management at Vanderbilt University in Nashville, Tenn. Cohen said he based his findings on a statistical analysis of auto purchases financed by NMAC nationwide from January 1999 through April of this year.

Among Cohen’s findings:

• 53.4 percent of African American buyers were charged a dealer markup above GMAC’s base rate compared with 28.2 percent of white borrowers.

• African American buyers paid, on average, more than 2.5 times the amount in "subjective markup" compared with white buyers---$656 vs. $244.

• African Americans who receive a subjective markup were charged, on average, $1,229, compared with $867 for whites.

• Of $421.6 million in markups paid by 1.5 million GMAC borrowers identified as African American or white, $83.9 million was paid by African Americans. That represented 19.9 percent of the total, even though African Americans made up only 8.5% of the customer base.

Cohen’s report broke down the most expensive individual markups by state. Topping the California list, based on dollars spent, was a buyer in Roseville who paid a $19,577 markup on a 60-month loan with $48,601 financed. The report said there was a 13.01 percent markup in that transaction. The highest percentage markup in the report was a Cupertino customer who paid a $12,425 markup on a 60-month loan with $23,530 financed. The markup on the overall purchase came to 17.46%, according to the report.

Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a local, non-profit advocacy group, noted that the Roseville buyer in the report was shown to have a good credit rating. She contended that the report showed that GMAC’s lending practices had "nothing to do with risk. It’s just greed."