The CFPB's analysis revealed that servicemembers typically borrow larger amounts while making smaller down payments than their civilian counterparts. For new vehicles, military borrowers financed an average of $39,000—over $2,200 more than civilians—while putting down about $1,100 less. For used vehicles, servicemembers financed $27,500 on average, nearly $400 more than civilian borrowers.
The bureau found that servicemembers faced higher annual percentage rates and longer loan terms, contributing to increased financial burden over time. Military borrowers encountered APRs averaging 0.6 percentage points above civilian rates, resulting in monthly payments of $644 for new vehicles—nearly $20 more than civilian borrowers and nearly $1,300 more over the life of the average loan.
Add-on products further increased costs for military borrowers, with over 70% of servicemembers purchasing such products and paying about $140 more on average than civilians. Warranty, service, and maintenance plans were the most expensive category, while GAP products saw sharp increases in 2020 after the Department of Defense changed its interpretation of the Military Lending Act.
The report highlighted servicemembers' particular vulnerability in the auto lending market due to their transportation requirements for military obligations and their often young age and distance from family support systems. The CFPB noted that military borrowers are more likely to make negative equity trade-ins and less likely to make substantial down payments, creating additional financial risks.
The bureau's findings come amid broader CFPB enforcement efforts targeting financial services for military families. Recent actions include ordering Navy Federal Credit Union to refund over $95 million in illegal overdraft fees and taking enforcement action against FirstCash and MoneyLion for Military Lending Act violations.
The CFPB's research also found that Reserve and National Guard members were forgoing an estimated $9 million annually by not receiving interest rate reduction benefits under the Servicemembers Civil Relief Act. The bureau has proposed rules to protect servicemembers from data brokers selling sensitive personal information to bad actors.
The report underscores ongoing concerns about predatory lending practices targeting military personnel and suggests the need for enhanced consumer protections in the auto financing sector. The CFPB continues to encourage servicemembers to submit complaints through its website or whistleblower programs.