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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

He dismissed the study's claims of dealer discrimination.

"There is no disparate treatment," Burns said. "We have different programs, protocols, procedures and paperwork that we complete on each transaction to make sure everyone is treated fairly. But that doesn't mean that everybody has the same prices or financing because everyone is different."

The study found:

--Add-on products were sold at prices far above dealer costs. One dealer sold 1,000 window etching products, each with a dealer cost of $16 and a charge to the consumer of $189, for a markup of $173 or 1,081 percent.

--Companies that provided car financing played a role in allowing excessive and discriminatory markups of add-on products. In order to get more business from dealers, some creditors allow higher markups for add-on products.

--Dealers inconsistently priced add-on products, which led to pricing discrimination. Hispanics were charged higher markups than non-Hispanics. Individual dealerships charged some consumers many times more than other consumers for the same product for which the dealer's cost was fixed.

The study examined a long list of products including key, tire and dent protection plans, prepaid maintenance plans, warranty plans, credit insurance and guaranteed auto protection, which, in a collision, covers the difference between the outstanding debt on the vehicle and the insurance payout.

The source of the data was not disclosed, but the study said it did "verify the accuracy of individual data points through several sources including litigation, newspaper articles, bankruptcy filings and other independent sources."

To determine ethnicity, the nonprofit said it looked for Hispanic surnames and cross-referenced them with loan data to verify them.

Aside from add-ons, Mark Scarpelli, chairman of the National Automobile Dealers Association, said earlier this month that incentive programs in which dealers get cash from automakers for meeting sales goals can lead to wild discrepancies in prices between dealerships.

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