WASHINGTON, D.C. — A recent report from the Consumer Financial Protection Bureau (CFPB) reveals that U.S. servicemembers face higher financial risks and costs compared to civilian borrowers when securing auto loans. The findings, based on an analysis of over 20 million auto loans originated between 2018 and 2022, underscore notable disparities in loan terms, down payments, and the overall financial burden shouldered by military borrowers.
While servicemembers generally pay comparable prices to civilian buyers for both new and used vehicles, they often face steeper interest rates, extended loan terms, and additional fees. Military borrowers, on average, take out larger loans, make smaller or no down payments, and are more likely to engage in negative equity trade-ins. According to the report, these factors contribute to servicemembers experiencing higher monthly payments and greater overall costs during the life of their loans.
Key findings include significant differences in borrowing habits. For new vehicles, servicemembers borrowed an average of $39,000—approximately $2,200 more than civilian buyers—while putting down about $1,100 less. On used vehicles, servicemembers financed an average of $27,500, which is nearly $400 more than civilians. Furthermore, servicemembers faced annual percentage rates (APRs) 0.6 percentage points higher than civilian borrowers, resulting in average monthly payments of $644 for new vehicles, $20 more per month than civilians pay. Over the course of the loan, this adds nearly $1,300 in extra costs.
Add-on products such as warranties, service plans, and guaranteed asset protection (GAP) further amplify the financial burden. More than 70% of servicemembers purchased such add-ons, paying approximately $140 more on average for these products than civilian borrowers. GAP products, which provide financial protection in the event of a total loss, saw significant increases in purchases among military borrowers following a 2020 change in the Department of Defense’s interpretation of the Military Lending Act.
The report highlights the unique vulnerabilities servicemembers face, citing their frequent reliance on personal vehicles for transportation to fulfill military obligations and their limited local support networks. Younger military personnel, in particular, may have fewer financial resources to draw upon, making them more susceptible to costly lending practices.
The CFPB’s findings raise critical concerns about the financial well-being of U.S. servicemembers and the systemic challenges they face in the auto lending market. Policymakers and financial institutions are urged to address these disparities by fostering fair lending practices and providing greater protections for military borrowers. Efforts to improve financial education and support for servicemembers can help mitigate risks and ensure more equitable access to necessary transportation solutions moving forward.
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