Getting Best Car Rates

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You thought driving while Black was risky for a brother?

If you are buying a car while Black, you are in danger of paying a higher interest rate (costing you thousands of extra dollars) to finance your car loan than a white person would under identical circumstances. According to an analysis of the Federal Reserve Survey of Consumer Finances by the Consumer Federation of America Blacks paid a typical loan rate of 7 percent for new cars, compared with a rate of 5 percent for whites. That translates to the Black person paying $1,500 more than a white car buyer for the same $30,000, 5-year car loan. Worse, African Americans were more likely than any other group to pay interest rates of more than 15 percent on auto loans.

The good news is that a series of legal actions (led by groups such as the National Consumer Law Center) against auto finance firms could help end such discriminatory practices. In the meantime, you can protect yourself--and save your money--by following these recommendations when you decide to buy a new or used car:

Know your credit scores before you go shopping. You should be checking your credit reports and scores from all three major credit reporting agencies--Equifax, TransUnion and Experian--at least twice a year. Some car dealers may offer the best financing deals to buyers with a minimum middle credit score of say 700. If yours is at 689, it may be worth it to delay your purchase and take steps to improve your score, so you can be eligible for the best interest rates.

Shop for your car loan before you shop for the car. You can compare interest rates being offered nationally and in your area at web sites such as You should also check with any bank or credit union where you have an account. The goal is to find and secure a loan at the lowest rate you can get before you set foot in a dealership. That way, if the dealer wants to finance the loan, he'll have to beat the rate you found on your own. Also, you'll already know what kind of financing deals you qualify for, so the dealer won't be able to talk you into signing for a loan with a higher rate than you deserve.

Remember: You want a good deal on the loan--and the car. Don't be so happy to get a low interest rate on your car loan that you get sucked into paying more than you have to for the car. Even a zero-percent loan won't save you money if you have to forego a rebate or pay more for the vehicle itself. Use web sites such as to compare prices for the models you are interested in before you start visiting dealerships.

Whatever you do, don't allow yourself to be rushed. Taking the time to shop for and compare deals can save you thousands of dollars.

Alfred Edmond, Jr.'s column on Money Sense appears weekly at as well as on the Doug Banks Morning Show every Wednesday.


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