The Consumer Financial Protection Bureau (CFPB) has revealed concerning data on the auto lending market, particularly as it pertains to US servicemembers. A report published by the agency indicates that servicemembers are shelling out more in auto loans compared to their civilian counterparts. According to the CPFB findings, which analyzed over 20 million auto loans originated from 2018 to 2022, servicemembers generally borrow larger amounts, make smaller down payments, and bear the burden of higher monthly expenses.
Military personnel seem to be at a disadvantage in the market, often taking out larger loans with less down. The CPFB's report details that servicemembers on average borrowed $39,000 for new vehicles—over $2,200 more than what civilians borrowed—while laying down about $1,100 less. For used vehicles, the average financed amount was $27,500, almost $400 above civilian financing. These differences in borrowing norms contribute to a palpable gap in financial strain between military borrowers and the average citizen.
Furthermore, servicemembers contend with average annual percentage rates (APRs) that are 0.6 percentage points higher than those of civilians, exacerbating the disparity in the long term. Over the duration of an average new vehicle loan, a servicemember's monthly payment ends up being nearly $20 more than a civilian's, amounting to close to $1,300 more over the life of that loan. "Military borrowers pay higher rates over longer terms," the CPFB report states, drawing attention to the additional financial commitments serviced by those in uniform.
The extra costs for servicemembers don't stop there, as the report continues to outline the impact of add-on products. Over 70% of military loan recipients purchased add-ons and paid approximately $140 more on average compared to civilians. The most common—and costly—were warranties, service, and maintenance plans, followed by GAP products. The latter saw a spike in purchases by servicemembers in 2020 following the Department of Defense's adjusted interpretation of the Military Lending Act.
The CFPB isn't just highlighting issues; they are actively working to protect servicemembers' finances. They recently directed Navy Federal Credit Union to refund more than $95 million in inappropriate overdraft fees to servicemembers, veterans, and their families. In actions against FirstCash and MoneyLion, the bureau addressed the illegal and exorbitant interests that had been charged in violation of the Military Lending Act. Additionally, the CPFB is stepping in to safeguard both military personnel and civilians from data brokers potentially selling their sensitive personal information to nefarious entities. Consumers and whistleblowers are prioritized too, with avenues for complaints and reporting illegal company activities made accessible via the CFPB's website or whistleblower email.
