According to the bureau, servicemembers borrowed an average of $39,000 for new vehicles, "over $2,200 more than civilians," while putting down "about $1,100 less" at the time of purchase. For used vehicles, the agency said servicemembers financed $27,500 on average, "almost $400 more than civilians."
The CFPB said servicemembers faced annual percentage rates 0.6 percentage points above civilian rates, along with longer loan terms. The result, according to the report, is monthly payments averaging $644 for new vehicles, "nearly $20 more than for civilian borrowers and nearly $1,300 more over the life of the average new vehicle loan."
The bureau said more than 70% of servicemembers purchased add-on products, paying "on average about $140 more for add-on products than civilians." Warranty, service and maintenance plans were the most common category, followed by GAP products. The CFPB said servicemember purchases of GAP products "increased sharply in 2020, after the Department of Defense changed its interpretation of the Military Lending Act."
The agency offered a rationale for the disparity. Because servicemembers "are often required to have a personal vehicle for transportation in order to fulfill their military obligations," and because many are "young men and women far away from family supports," they "may be especially vulnerable to overreaching lending practices and have fewer resources to draw upon," the report said.
The CFPB tied the report to other recent enforcement and research targeting financial products marketed to the military. The bureau said it recently ordered Navy Federal Credit Union to refund "over $95 million in illegal overdraft fees charged to servicemembers, veterans, and their families," and took action against FirstCash and MoneyLion for charging servicemembers what it called "illegal and high interest in violation of the Military Lending Act."
The agency also said its research found Reserve and National Guard members were "forgoing an estimated $9 million annually by not receiving the interest rate reduction benefit provided by the Servicemembers Civil Relief Act."