Bank of America just raised its EUR/USD forecast
Investing.com -- A report published today by the Consumer Financial Protection Bureau (CFPB) reveals that United States servicemembers typically shoulder higher costs and face greater financial risks than civilian borrowers in the auto lending market. The report, which analyzed over 20 million auto loans initiated between 2018 and 2022, found that military personnel generally take on larger loans, make smaller down payments, and bear higher monthly costs.
The study showed that while servicemembers pay almost the same for both new and used vehicles as civilian buyers, they usually pay more in interest and fees. Military borrowers also make these higher payments for a longer period. They are less likely to make a down payment, more likely to make a smaller down payment, and more prone to make a negative equity trade-in. The report suggests that servicemembers may be particularly susceptible to overreaching lending practices due to their military obligations requiring personal transportation and potentially being young individuals far from family support.
Key findings of the report include servicemembers borrowing more while putting less down. For new vehicles, servicemembers borrowed an average of $39,000, over $2,200 more than civilians, while making about $1,100 less in down payments. For used vehicles, they financed $27,500 on average, almost $400 more than civilians.
The report also showed that military borrowers face higher rates over longer terms. Servicemembers encountered average annual percentage rates (APRs) 0.6 percentage points above civilian rates and longer loan terms. This resulted in average monthly payments of $644 for new vehicles for servicemembers, nearly $20 more than for civilian borrowers and almost $1,300 more over the life of the average new vehicle loan.
Over 70% of servicemembers purchased add-on products, paying on average about $140 more for these than civilians. The most common and expensive category of add-on products purchased were warranty, service, and maintenance plans. The second most common was GAP products, with servicemembers’ purchases of these increasing sharply in 2020, following a change in the Department of Defense’s interpretation of the Military Lending Act.
The CFPB continues to safeguard servicemembers’ financial interests across markets. Recent actions include ordering Navy Federal Credit Union to refund over $95 million in illegal overdraft fees charged to servicemembers, veterans, and their families, and taking action against FirstCash (NASDAQ:FCFS) and MoneyLion for charging servicemembers illegal and high interest in violation of the Military Lending Act. The CFPB’s research found that Reserve and National Guard members were not receiving an estimated $9 million annually by not receiving the interest rate reduction benefit provided by the Servicemembers Civil Relief Act. The CFPB has also proposed a rule to protect servicemembers and other Americans from data brokers selling their sensitive personal information to scammers, stalkers, and foreign surveillance operations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.