Posted On: July 29, 2007

Why are bad cars called lemons?

Lemons are healthy fruits, rich in vitamin C and other nutrients, used in a myriad of wonderful products, from lemonade and lemon meringue pie to cleaning agents. So, why do we call bad cars lemons?

The Online Etymology Dictionary indicates that there are several possible origins for ‘lemon’ being used to refer to an inferior product. One possibility is that it came from early 20th century American slang, where a ‘lemon’ referred to "a person who is a loser, a simpleton," as a lemon. Another possibility is that the term originated from British pool hall slang, where a ‘lemon game’ was a game played by a hustler. It seems most likely that that the use of a ‘lemon’ as a bad car came from another British slang term from the early 1900’s in which “to hand someone a lemon” was "to pass off a sub-standard article as a good one." (Online Etymology Dictionary).

Regardless of the where they came from, the terms ‘lemon’ and ‘lemon laws’ are now common in our modern vocabulary, and codified in our laws. In the context of and vehicles, most everyone agrees that buying a lemon new car, does leave one with a sour feeling.

Posted On: July 7, 2007

Racial inequality in auto loan interest rates

You may think that the interest rate of your auto loan depends only on your credit rating, but your race may also play a part. According to recent (2007) analysis by the Consumer Federation of America (CFA) of the Federal Reserve Board’s Survey of Consumer Finances data for 2004, black car buyers pay a much higher interest rate than white car buyers*. For new cars, the median rate for black buyers was 7%; whereas, it was 5% for whites and 5.5% for Hispanics. This racial gap increased from 2001, when the difference in rates between black and white borrowers was 1.3%. The analysis also found that 27% of new car loans taken out by blacks had interest rates of 15% or higher.

The discrepancy in interest rates is likely a result of a combination of several factors. The National Automobile Dealers Association claims that the factors that have the greatest impact on the interest rate a purchaser receives are the individual’s credit history, credit rating, and the prevailing interest rate at the time of purchase. Stephen Brobeck, the executive director of the CFA said that these results likely indicate that there is possibly different treatment based on race (i.e. discrimination).

Regardless of your race, it is always a good idea to shop around for loan rates when you go to buy a car. Frequently, the rates a dealer may offer you are much higher than you could obtain at other lending intuitions, especially if your credit is less than pristine.

In addition to shopping around for competitive loan rates, it is also important to research on your car to see if it is likely to be a lemon.

CFA utilized the services of Professor Catherine Montalto, a professor at The Ohio State University to analyze the latest Survey of Consumer Finances data, which was collected in 2004 and released last year. These data are for a representative sample of about 3,000 American households.

Posted On: July 2, 2007

Does buying a red car put you at a disadvantage?

You may have heard that red cars are ticketed more often and that owners of red cars are charged higher insurance rates. Different colors can have different effects on human behavior and elicit different emotional responses. Blue is sometimes considered a calming color while green may be thought of as refreshing and is easy on the eyes. Red is the most emotionally intense color. It can evoke passion, strength, speed, and even rage. Note that different colors have different meanings to different cultures, so these descriptions may not hold true globally.

(An aside: you may have seen matadors waving their red capes at a charging bull. A bull can not distinguish red from green, so, the red color may be more for the benefit of the spectators. The bull likely charges because of the motion).

Common wisdom has said that, because of differing reactions to color, police are more prone to notice and ticket red cars. Also, insurance companies charge higher rates for red cars- perhaps because they might think that a person who would choose red is one that would be more aggressive driver.

According to, both these claims are false. They cite a small study showing that red cars did not receive a disproportionate share of attention from the police. This same study did find that the police seemed to cite white cars less than would be expected. According to insurance companies, the rate you pay depends on your driving record, location, and type of car you have. Red is a favorite color for sports cars though, and sports cars generally do cost more to insure.

So, whatever color you choose, I hope your car is not a lemon.