New Report Reveals Racial Discrimination by Auto Dealerships

WASHINGTON, D.C. – The National Fair Housing Alliance (NFHA) published a new report Thursday, titled “Discrimination When Buying a Car: How The Color of Your Skin Can Affect Your Car-Shopping Experience.”

The report highlights racial discrimination in car sales and financing by dealerships.

NFHA recently conducted an investigation of franchised dealerships for some of the most popular car brands in the United States. Eight dealerships in eastern Virginia were investigated using standard paired testing methodology.

Within each paired test, one White tester and one Non-white tester visited a car dealership to obtain purchase and financing information for the same car. In each case, the Non-white tester was more creditworthy than the White tester.

The investigation found that testers of all races had difficulty obtaining concrete and transparent information regarding car pricing, interest rates, and loan options for which they qualified.

The absence of this information makes it impossible for consumers to evaluate the details of a transaction and to comparison shop. 

Though all testers dealt with the elusive practices of dealerships, testers of color endured more economically disadvantageous and biased treatment. Non-white testers often received more costly pricing options than their White counterparts for the exact same vehicle—down to the vehicle identification number.

Auto dealers used various pricing tactics to discriminate.

For example, dealers helped White testers by offering rebates or helping to bring down interest rates more often than they did for Non-white testers. Non-white testers were more often presented with higher-cost financing options, even though they were better qualified than their White counterparts. They were also more likely to experience disrespectful treatment. 

Key findings of the report:

• 62.5 percent of the time, Non-White testers who were more qualified than their White counterparts received more costly pricing options.
• On average, Non-White testers who experienced discrimination would have paid an average of $2,662.56 more over the life of the loan than less-qualified White testers.
• 75 percent of the time, White testers were offered more financing options than Non-White testers.

People of color are more likely to live in areas that do not have a mainstream bank, making access to fair auto dealer financing more important for these borrowers. These same consumers are also more likely to live in areas that do not have reliable transportation, which makes the availability of fair and quality auto financing that much more vital.

Disparities in access to credit and transportation reflect historical discrimination in the credit marketplace and the perpetuation of segregation that has created an enduring wealth gap in America.