Cars are expensive. Even modestly-priced vehicles can cost $5,000-$8,000 every year once you tally up payments, insurance, taxes, and electricity or gas. Leasing a car is only slightly less expensive. Buying a vehicle in cash spares you from financing costs, but not from paying the $30,000 or more price tag.1
All of this costs even more when you are not white. From The impossible paradox of car ownership in Vox (emphasis and footnotes mine):
Minority applicants, according to research by Southern Methodist University professor Erik Mayer and colleagues2, are 1.5 percentage points less likely to get a loan compared to their white peers, even after factoring in income and credit scores. Those who receive loans are charged interest rates that are 0.7 percent APR higher than similar white buyers. “Minorities are treated as if their credit score is roughly 30 points lower than it actually is. But then when we look at default rates on auto loans, we do not find any evidence that this is justified in economic terms,” Mayer tells Vox.
Car ownership, however, enables opportunity. You may not keep your job if you can't get to it every day and on time. A reliable car helps ensure that you can. But they're still so expensive! This passage from Record number of car buyers paying $1,000+ per month amid low vehicle inventory blew my hair back.
The number of car buyers paying $1,000 or more a month to finance a new vehicle is creeping higher, closing in on nearly one-fifth of new-car buyers — an all-time high. The average monthly car payment has topped a whopping $730 recorded in the first quarter to now sit at $733, according to second-quarter vehicle transaction data from Edmunds.
Worse still, 65% of those car buyers with $1,000 payments have loan terms ranging from five to seven years. I repeat, there are people in this world who are paying $12,000 per year for five to seven years for an asset that will absolutely depreciate.
This is one huge reason why I believe we need to build much more transit and bike infrastructure, and more housing in cities, near jobs. Low-income people shouldn't have to be cost-burdened by a car, or time-burdened by the lack of one. The rest of us deserve options for how we get around.
You can read the paper, Racial Discrimination in the Auto Loan Market (PDF download) for yourself. Although Vox uses the term minority, the paper discusses Black and Hispanic borrowers specifically. According to the paper, policies can and did help reduce discrimination. A policy from 2013 that was rolled back in 2018
reduced discrimination in interest rates by nearly 60%. ↩