American auto dealerships are using add-ons to inflate a car’s total price in the form of extended warranties, dent protection, and credit insurance, according to a study by the National Consumer Law Center (NCLC).
Dealerships can mark up auto add-ons by more than 1,000%, and often discriminate against consumers with Hispanic surnames, according to the Boston-based non-profit organization’s latest report. The NCLC report—issued in October—used data pertaining to about 3 million add-on products sold from September 2009 through June 2015 at about 3,000 dealerships nationwide.
Typically, the auto add-ons are sold to consumers for much more than they cost the car dealership. One dealership sold a $16 window etching product for $173—a markup of 1,081%.
In addition, car dealerships will often switch prices from day to day, or even from customer to customer. With the release of the auto add-ons report, National Consumer Law Center officials called for more consistent prices for buyers across the board.
“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.”
However, inconsistent pricing is not unusual in this business, according to Michigan Automobile Dealers Association (MADA) officials.
“There is no disparate treatment,” said Terry Burns, MADA's executive vice president. “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 data source for the NCLC’s report was not disclosed, however the non-profit organization used the data and their report as a call for reform in the auto industry.
“Dealers should be required to post the available add-ons and their prices on each car in the lot, along with the price of the car,” the report states, adding a final suggestion: “State and federal enforcement authorities should investigate discrimination in pricing of add-on products and bring enforcement actions.”