Report Highlights Racial Discrimination in Car Sales, Auto Loans

Less-qualified whites were given more financing options than more credit-worthy non-whites at eight dealerships in Virginia.

Car salesman
Bruce Laurance—Getty Images

The color of your skin may matter more than your credit history in terms of what kind of deal you'll be offered in shopping for a vehicle.

Non-white car shoppers are more likely to be offered costlier financing options, even when they are more creditworthy than white consumers, a study released this week found.

The investigation looked at franchised dealerships of popular brands in the U.S., with human testers, one white and one non-white, visiting eight dealerships in eastern Virginia. At each dealership, the testers inquired about purchase and financing information on the same car. 

The probe found testers regardless of their skin color had a hard time getting concrete and transparent information on 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," said the National Fair Housing Alliance, a group devoted to ending discrimination in housing, in a news release issued Thursday.

While all testers "dealt with the elusive practices of dealerships, testers of color endured more economically disadvantageous and biased treatment," according to the Alliance.

Non-white testers were often given more costly pricing options than white testers for the same vehicle, down to the vehicle identification numbers. 

White testers were more likely to be offered rebates or lower interest rates than non-white testers, even though they were better qualified.

More than half of the time, or 62.5 percent, more qualified non-white testers were given costlier pricing options, while 75 percent of the time white testers were offered more financing options than their non-white counterparts, the report found.

Non-white testers who experience discrimination would have paid an average of $2,662.56 more over the life of the loan than less-qualified white testers, according to the findings.

A trade organization that represents dealerships called the report misleading, arguing that broad conclusions were being drawn from a small sampling.

"Every customer deserves to be treated fairly, and there is no place for discrimination in auto lending or sales – period," said a spokesperson for the National Automotive Dealers Association. 

That said, the NADA spokesperson added: "it is highly irresponsible to draw conclusions from a study based on a handful of interactions that did not even lead to sales in a market where 17 million actual sales occur each year. The claims made in the report are in no way representative of the overwhelming majority of new-vehicle transactions.”