Discrimination in the Auto Loan Market
42 Pages Posted: 2 Jan 2019 Last revised: 10 Feb 2019
Date Written: February 6, 2019
We provide direct evidence of lending discrimination in the U.S. auto loan market. Using a novel dataset that combines credit bureau records with borrower characteristics, we find that Black and Hispanic applicants’ loan approval rates are 1.5 percentage points lower than White applicants’, even after controlling for creditworthiness. Our results are larger in states where racial biases are more prevalent and competition is lower. Minority borrowers who receive an auto loan pay a 56 basis point higher rate than comparable White borrowers. Controlling for a broad set of loan and borrower characteristics, minority borrowers have lower ex post default rates, consistent with racial discrimination.
Keywords: Discrimination, Race, Auto Lending, Household Finance, Household Debt, Credit Access
JEL Classification: D12, D14, D18, D60, G21, G28, J15
Suggested Citation: Suggested Citation