Minorities, the Auto Loan Losers

Dealers defend markups as legitimate compensation for helping arrange loans.

But there is a difference between a fair profit and gouging. Certain borrowers should be charged a higher interest rate if their credit history and other factors indicate they're a risk. But arbitrarily increasing a loan's interest rate based on someone's skin color, national origin and yes, even naivete, is despicable.

The CFA data illustrate what was happening before the recent lawsuit settlements. Let's see how things change once the terms of those settlements take effect. For example, consumers will have to be told in writing that their financing is negotiable. The settlements also impose markup caps that range from 1.5 to 2.5 percentage points depending on the length of the loan, Rossman said.

"We hope that the many lawsuit settlements will reduce the disparity significantly," Brobeck said.

So how do you get the best financing deal?

"All consumers, not just African Americans, need to protect themselves by getting an auto loan rate quote from their own bank or credit union before they go shopping for a car," Brobeck said.

Notice he said before you set a foot onto the car lot or go online to shop for a car. If you don't follow that advice, you're likely to pay more for your auto loan than your risk profile suggests.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.

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· By e-mail:singletarym@washpost.com.

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