There is no limit to the number of ways sellers will try to get as much money as they can from buyers. One way is to sell at high prices. Another way is to charge high-interest rates on loans.
Auto loans and mortgages are good examples.
A word on the history of lending to minorities. The way banks did not give loans to people living in lower-income minority neighborhoods was called “redlining.” Changes in laws made redlining unlawful. In the early part of this century, lenders loosened the rules, and millions of people were able to borrow money to buy homes.
When the home mortgage bubble burst in 2008, millions were in danger of losing their homes. First, many who had gotten loans were not good risks. Second, interest rates on the loans went up. Third, the value of the homes went down, and they could not be sold. In the recession that took place, people did not have the money to buy even cheap houses.
Auto loans have become the home mortgages of this era.
Money has loosened up, and the lure of cars has always been great. The federal government says auto dealers are trying to sell as many cars as they can to minorities. They are charging high-interest rates. They are also charging additional interest called “dealer markups” onto a borrower’s loan.
The government does not know if these practices are mostly being done to minority customers. They do not usually know the race of the buyer. Based primarily on car dealership locations, they do estimate that about 235,000 minority buyers paid higher interest rates than white buyers between 2011 and 2013.
Are minority dealers a part of this practice? It is hard to say. Out of 17,500 car dealerships, blacks own 260, Hispanics own 485 and Asians own 238. This is about 6 percent of all dealerships.
Source: The New York Times March 30, 2015