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Car dealers jacking up add-on prices, discriminating against Hispanics, study finds

Frank Witsil, Detroit Free Press on

Published in Automotive News

DETROIT -- The National Consumer Law Center warns that the prices of many auto add-ons -- including extended warranties, dent protection and credit insurance -- are excessive, arbitrary and discriminate against Hispanic customers.

One Michigan dealer, the nonprofit's study found, was charging customers $349 to $5,000 for window etching even though the dealer's cost was just $50.

"Pricing of add-ons is something we've been looking at for years," said John Van Alst, the study's primary author. "We're an organization that's focused on low-income consumers, and we've seen a lot of abuses related to add-ons."

What's more, he said, even if customers didn't want to buy the add-ons, they often felt forced to just to bring the long, arduous negotiations to an end.

The Boston-based organization's 58-page study, Auto Add-Ons Add Up, looked at data on about 3 million add-on products sold from September 2009 through June 2015 at about 3,000 dealerships nationwide. It was published earlier this month. The key findings: "Add-ons lead to unreasonably high and inconsistent pricing, and Hispanic customers were charged more."

The study also urged some public policy recommendations that would make pricing more transparent.

Andrea Bitely, a spokeswoman for Michigan Attorney General Bill Schuette's office, had no comment on the study. She declined to say whether anyone had ever filed any complaints in Michigan about add-on pricing.

In response to the study, the Michigan Automobile Dealers Association, a statewide nonprofit trade organization representing more than 650 new-vehicle franchises, said it is not unusual for dealers to charge different prices for different products for different vehicles.

That's just part of the free-market system, said Terry Burns, MADA's executive vice president. Customers who don't want to pay a certain price can negotiate a better deal or simply go down the road to another dealer that wants their business, he added.

Burns, who said he had not read the study, pointed out that many variables go into pricing.

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