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Title:

Vehicle Loan Financing in Low-Income and Minority Households

Accession Number:

01663981

Record Type:

Component

Abstract:

While the United States has made substantial investments in public transit, many households still need vehicles to access employment and other economic opportunities. Vehicles are especially important for low-income households in areas with limited public transit service. Some households, particularly low-income and minority households, may have difficulty purchasing automobiles due to high vehicle loan interest rates. Disparities in vehicle loan interest rates can be explained, in part, by differences in financial and demographic characteristics. However, previous research has provided evidence of persistent racial disparities controlling for these characteristics. In this paper, the authors investigate the relationships among income, race/ethnicity, and vehicle financing using data from the Survey of Consumer Finances from 2004 to 2013. In recent years, the number of households in the United States with high-interest vehicle loans has increased along with the growth in subprime automobile lending. This paper extends earlier research by investigating vehicle loan interest rates in the context of this growth. The authors model vehicle loan interest rates for all households and for households at various points of the percentile distribution.Controlling for demographic, financial, and vehicle loan characteristics, racial and ethnic disparities in interest rates remain. Compared to white households, Hispanic and black households are more likely to rely on vehicle finance companies and pay higher premiums to do so, especially at the highest quartile of the percentile distribution. The findings suggest the development of policies and programs to address the barriers that households—particularly minority households—face in purchasing automobiles.

Supplemental Notes:

This paper was sponsored by TRB committee ADD20 Standing Committee on Social and Economic Factors of Transportation.

Report/Paper Numbers:

18-05868

Language:

English

Authors:

Brumbaugh, Stephen
Blumenberg, Evelyn
Pollard, Jane

Pagination:

8p

Publication Date:

2018

Conference:

Transportation Research Board 97th Annual Meeting

Location: Washington DC, United States
Date: 2018-1-7 to 2018-1-11
Sponsors: Transportation Research Board

Media Type:

Digital/other

Features:

Figures; References; Tables

Identifier Terms:

Survey of Consumer Finances

Subject Areas:

Finance; Highways; Policy; Society; Vehicles and Equipment

Source Data:

Transportation Research Board Annual Meeting 2018 Paper #18-05868

Files:

TRIS, TRB, ATRI

Created Date:

Jan 8 2018 11:31AM