Auto Loan Price Disparities by Source and Race
Presented by:
Shuwei Zeng
Department of Agricultural & Applied Economics
University of Wisconsin - Madison
Wednesday, May 1, 2019
12:00 pm-1:30 pm
Taylor-Hibbard Seminar Room (Rm103)
Our paper documents racial disparities in interest rates of the auto lending market and investigate whether this racial pricing differences vary by different credit sources. Data from the Survey of Consumer Finances is employed to examine auto loans originated from 2000 to 2016. Results indicate that after accounting for observable demographic and financial measures, racial minority households pay 96 basis points higher auto loan rates relative to white households. Comparing across main lending sources, credit unions charge lower interest rates than commercial banks and vehicle financing companies. This pricing differences is even larger for minority households. Our calculation indicates that racial minority households with similar demographic and financial characteristics get 155 bps lower interest rates from credit unions than from other financial institutions. We future discuss the impact of credit union tax exemption and its non-profit structure on the difference in pricing strategies, which provides policy implications for mediating market frictions and racial discriminations in auto lending markets