Ignored Millions: The Controversial Oversight of Hispanic Car Buyers

Let’s talk bluntly about how Hispanic car buyers are often ignored or exploited, despite the overwhelming evidence that the Hispanic community is a growing economic force in the US. We’ll look at the facts first and then explore what might limit some business people from marketing to the community and building a good reputation that results in long-term and healthy sales. With that preface in mind, on with the discussion.

Fact and Fiction

Raw Facts

US Hispanics spending power continues to grow along with their population. Here a few facts that should motivate you to market to the community if are not doing so already:

• They are the largest ethnic minority in the US making up almost 20% of the population at 62+ million
• Hispanics will comprise 30% of our population by 2050
• They have a spending power of $2.5 Trillion, up from $225 Billion in 1990!
• If US Hispanics were a country, they would be the 8 largest economy in the world
• Account for over half of US Population Growth!
• 58% of US Hispanics are under the age of 34

To put those numbers in perspective, especially their spending power, according to Statista, US Hispanics spending power is greater than that of Russia, Italy, or Canada. Yep. No kidding.

How might the increased spending power be illustrated? Let’s look at this graph that looks at data from Statista and the Latino Donor Collaborative (LDT), a nonprofit think tank.

In 1990, the spending power of US Hispanics was $210 billion. In 2023, it had risen to over $3 trillion. This data is staggering. Sad to say, though, many people probably think that US Hispanic spending is on the left side of the graph and are oblivious to what the reality is on the right.

What does this tell us? In brief, the US Hispanic middle class is growing rapidly, even more so than the general population. Evidence? According to the LDT, “Latino income in the U.S. amounted to $2.5 trillion and grew at a rate of 4.7% compared to 1.9% for non-Latinos”. Enough said.

Lending Facts and Performance

In spite of the facts above, unsavory lenders have served to exploit Hispanic buyers by charging excess fees and interest rates.

According to a Social Science Research Network (SSRN) report written in March 2022, “Black and Hispanic applicants’ approval rates are 1.5 percentage points lower, even after controlling for creditworthiness… Results are stronger where racial biases are more prevalent and lending competition is lower. Minority borrowers pay 70-basis-point higher interest rates, but default less ceteris paribus, consistent with racial bias rather than statistical discrimination.”

What does ceteris paribus mean? Basically, it is Latin for “other things equal” or “all other factors or things remaining the same”. So, when all things are considered, the higher rates can only be explained as an act of prejudice. They are not driven by facts.

Dig a little deeper into the data and you find another interesting tidbit. While racial bias often produced higher interest rates for black and latino borrowers, actual default rates were not higher ceteris paribus. Think about it. Higher rates would need to be justified by higher default rates. That wasn’t the case. If you want more reading, here are 2 reports that support the above comments from a number of angles:

1. Evidence of Racial Discrimination in the $1.4 Trillion Auto Loan Market, Chicago Federal Reserve, 1/23/23.
2. Racial Disparities in the Auto Loan Market, SSRN, 5/10/22
3. CFPB Takes Action Against Fifth Third Bank for Auto-Lending Discrimination and Illegal Credit Card Practices, Consumer Financial Protection Bureau, 9/28/15

How We See the World

How we see the world around us often is determined by the information we collect from family, friends, our community, the news media we watch, the books we read, etc.. All of these “inputs” color our view of the world and we relate to those in it, from those closest to us to those we don’t know and only see on TV or the internet.

If I look at life from my perspective, I grew in a largely white area of Rhode Island. Many of those around me were of white anglo saxon descent, or a close variation. Our largest “ethnic group” was made of people of Portuguese descent via the Azores. If I recall correctly, there was only one black family and I went to school with the son and daughter of that family.

My father was an individual who held many prejudices. Growing up as a little boy, I saw those prejudices as “normal”. It was what I knew. If I turned on TV, those views were often supported by the evening news which showed crimes being conducted by people of one color or another.

As I got older, I developed a love for data, facts and logic. Consequently, as I learned facts, my father’s views, and those of others I knew, held less sway over my life.

Why do I say this and what role does it play in this article? Well, it’s simple. All of you have similar experiences, both good and bad, that shape how you see the world. The challenge for you as a car dealer is to make sure that the perception that you have of your community is colored by facts and data, not by anything else. Such data-driven thinking can mean a huge difference in how successful your dealership can become.

Focus on Facts… And Adapt

If you look at the facts I used to open this discussion, there’s a broadly compelling argument that says you as a car dealer should market to your local Hispanic community since it is likely to continue to grow in both size and spending power.

Let’s look at one dealer we work with who rules his world by facts. Drew Pearlman, GM of O’Neil Nissan in Warminster, pays attention to all the things most successful dealers monitor. He keeps a close eye on aging, ROI on advertising, service performance/churn, sales performance, etc. This makes his dealership successful even in the weird market we have today.

Drew also pays attention to changing demographics around his dealership. Over 2 years ago, he reached out to SurgeMetrix to ask if we could help him market to his local Hispanic community. We analyzed the demographics around his dealership and got started.

Drew didn’t have any bilingual staff or experience selling to the community. He was a complete novice. Two years later, he has 3 bilingual staff, a well thought out outreach/advertising program to Hispanic shoppers, and 20% of his sales now comes from Spanish language buyers. This success has been the result of a deep commitment to facts and repeated experimentation to identify what works and doesn't work for his advertising.

An Hispanic Marketing Primer

If your sales team is used to selling only in one language, then you have some work to do to get them better prepared to sell in English and Spanish. Here are some things that you should do to prep your team and hone your sales process for bilingual sales:

1. Know your community! Marketing to US Hispanics is actually less about the language than it is about understanding nuances in the culture. Take time to learn the demographics of your community, understand the subcultures that comprise it, and flavor what you say accordingly.
2. Adjust your sales process so that you know how a bilingual sale is handled through each step in the process. Know who needs to be involved when and where at all times, and train appropriately.
3. Translate your transactional docs. This one is important. If all your docs are in English, then you need to translate them to make the sales process as easy as possible for your customers. In addition to being good for your customers , this mitigates risk, since having someone sign a document that they can’t read is a bad idea for you (but a great idea for lawyers who might want to sue you).
4. Promote Spanish language reviews! There is no better way to tell your Hispanic customers that your dealership treats bilingual customers well than to have your own customers say it for you, in their language.
5. Modify your referral process. If you have a referral process, then make sure you flavor it well for your Hispanic customers too.
6. Finally, be willing to experiment and try new things to improve success! No plan is perfect and all plans require modification over time. We’ve had dealers do a range of things to capture their Hispanic audience with one even dressing up as a clown. (Yes, that one was hilarious!)

Next Steps

So what are you going to do? How do you see the world as it relates to Hispanic car buyers? Are you basing your view on facts or something else?

Based on what I wrote above, some lenders take advantage of Hispanic shoppers by laying predatory loan structures on their backs. This might make money for the company taking this tack, but it wrecks their reputation in the community and increases their risks of lawsuits as the community, lawyers, and advocacy organizations get wise to their ways.

My recommendation, having now worked with Hispanic advertising for quite a few years, is to learn the facts and determine how you can best market to the community and build a strong positive reputation with the community over time. Such a strategy will help you grow your sales like Drew did. And, increased sales, for any dealer, is always a good thing.