Page 8 The Skanner October 19, 2016
Financial Literacy
Four Things You Should Know Before You Sign That Car Loan
W
hile there’s nothing new about
new car fever or the annual
ad blitz, there’s a good deal of
news on how consumers are
choosing and paying for their cars.
For example, new car sales increased
more than 5 percent from a year ago. At
the same time, the average credit score
for a new car loan dropped to 710 and
even lower to 645 for a used vehicle.
These data points provided by Expe-
rian, a major market intelligence irm,
also recently reported that today the
average monthly car payments are also
at an all-time high: $503 for a new car
and $376 for a used one. Car loan terms
are also longer and the amounts i-
nanced are both larger too. On average,
both new and used car loans are respec-
“
Charlene Crowell
NNPA Columnist
impact on the loan market.”
Consumers short on savings for a
down payment, but anxious for a new
or nearly-new car may opt for a lease
rather than a purchase – a very com-
plex transaction with pitfalls of its own.
During the irst quarter of 2016, nearly
a third of all new car transactions were
leases.
For consumers, the really ‘good deal’
All too oten consumers of color — especially
Blacks and Latinos — consistently try to nego-
tiate a ‘good car deal,’ but oten wind up paying
more than others
tively 68 and 66 months. The average
new car loan is now an all-time high at
$30,032.
“The continued rise in new vehicle
costs have kept many consumers ex-
ploring options to keep their monthly
payments afordable,” said Melinda
Zabritski, Experian’s senior director of
automotive inance. “As long as vehicle
prices continue to rise, we can expect
leasing rates to grow along with them…
The record highs we have seen in ve-
hicle prices also have had a signiicant
is tied not only to the cost of the car, but
also to the terms of the sale as well. Sale
or lease prices, interest rates, length
and other items are also important to
the art of ‘the deal’.
Unfortunately, all too oten consum-
ers of color — especially Blacks and
Latinos — consistently try to negoti-
ate a ‘good car deal,’ but oten wind up
paying more than others. The practice
of car dealers adding extra interest
to a car loan has a long history of dis-
crimination that has led to a series of
multi-million dollar settlements with
inance arms of major auto manufac-
turers and other ones with banks.
Fortunately, the Consumer Financial
Protection Bureau (CFPB) recently de-
veloped a series of consumer resourc-
es that can better inform those making
decisions. Topics included in the series
cover: how to plan for a purchase; loan
options and how to better negotiate a
car loan.
A consumer guide available for
download can also serve as a handy ref-
erence, providing greater detail on the
process from determining how much
to borrow to closing the sale.
Most importantly, CFPB provides
speciic steps to take before going to
dealers.
The CFPB strongly encourages con-
sumers to get an ofer from a bank,
credit union or other inance source
before setting foot in the dealership.
The Bureau also urges caution when
striking agreements with dealers.
Consumers should carefully review
loan paperwork to catch diferences
between what was verbally promised
against what the paperwork requires
borrowers to do. Consumers should
never sign any loan with unclear
terms, blank spaces or language they
do not completely understand.
According to the Center for Responsi-
ble Lending (CRL):
• 80 percent of car loans are inanced
through dealers;
• At more than one trillion dollars,
outstanding car loans are the third
highest amount of consumer debt,
surpassed only by mortgages and
student loans; and
• Although borrowers of color report
trying to negotiate loan terms more
than other consumers, they wind up
paying more for inancing.
Read the rest of this story at
TheSkanner.com
U.S. Small Business Administration and Milken
Institute Partner to Increase Access to Capital for
Underserved Communities
U.S. Small Business Administration
WASHINGTON, DC—In September
the U.S. Small Business Administra-
tion (SBA) and the Milken Institute
announced the Partnership for Lend-
ing in Underserved Markets (PLUM)
Initiative, a groundbreaking collabo-
ration to develop and test initiatives
designed to more efectively provide
capital to minority-owned business-
es.
Following the Great Recession,
small business owners, especially
those setting up shop in underserved
markets, have faced a recurring prob-
lem of limited access to capital.
Conventional small business credit
is still only at 85 percent of its pre-re-
cession level.
These gaps are especially evident
in metropolitan areas with higher
proportions of minority-owned busi-
nesses including Baltimore, Mary-
land and Los Angeles.
The PLUM initiative responds to
this persistent challenge by bringing
together leaders and policy experts
from SBA and the Milken Institute to
develop recommendations toward in-
creasing access to lending and other
sources of business capital in minori-
ty communities. The long term goal of
the initiative is to increase the capac-
ity of lenders to better serve histori-
cally underdeveloped sectors.