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 study by the nonprofit 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 organization's 58-page study, Auto Add-Ons Add Up, looked at data on about three million add-on products sold from September 2009 through June 2015 at about 3,000 dealerships nationwide. 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. It found that:

  • 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. 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 last month that incentive programs in which dealers get cash from automakers for meeting sales goals can lead to wild discrepancies in prices between dealerships.

"Any dealer who's had to deal with these programs can tell you that they are not only trust killers, but they're brand killers, too," he said. "Not being able to offer two customers the same price on the exact same equipped vehicle just because they came into the dealership on different days of the month destroys consumer confidence."

Marisabel Torres, a senior policy analyst at the advocacy group UnidosUs in Washington, said the discrimination findings were especially troubling.

"The fact that Latino consumers were charged in excess for unnecessary add-ons in the car-buying process demonstrates a need for increased oversight in this sector of the market," she said. "We urge state and federal authorities to further investigate and bring enforcement actions against those found to be engaging in these discriminatory practices."


Based on its study's findings, the National Consumer Law Center is urging these public policy changes:

  • Dealers should be required to post add-ons and their prices. Each car should include the price of add-ons. This would make the deals more transparent and allow car buyers to compare prices among dealers.

  • Require documentation of race or national origin for credit transactions. The data is required for mortgage transactions, but not for other credit agreements. Without the data, it is difficult to identify any discrimination patterns.

  • Investigate discrimination pricing of add-on products. The Consumer Financial Protection Bureau, the Federal Trade Commission, the Federal Reserve Board, and state attorneys general all have authority in this area.