A new analysis of car sales data reveals that many consumers are being charged triple-digit mark-ups on purchases that include a lot of questionable add-on products that cost consumers a bundle and reap major profits for dealers.
A new policy analysis by the National Consumer Law Center (NCLC), examined sales and financing practices widely used by car dealers. Aggressive sales of add-on products were frequently offered at inflated prices. Additionally, these same products and services are usually available for consumers to purchase more cheaply on their own. When these items are added to the financing of the vehicle, consumers end up padding the costs of finance, making the debt more costly than necessary.
After analyzing data on the sale of three million add-on products sold on 1.8 million vehicles from September 2009 through June 2015, these add-on costs were both unreasonably high and varied at the discretion of the dealership as to the price levels that would be charged.
NCLC also cites previous research by the Center for Responsible Lending (CRL) that determined car buyers who financed vehicles at the dealership in 2009 paid $25.8 billion in interest rate mark-ups. That same study also found that more than half of Black car purchasers (54 percent) were also charged loan kickbacks, compared to only 31 percent of Whites.
In 2014, a CRL consumer survey also found that Black and Latino car buyers purchased more add-on products than other consumers after being told that the additional items were required to finalize the deal. As a result, although consumers of color reported trying more than other consumers to negotiate a fair car deal, they still wound up paying more for their purchases than similarly-situated White consumers.
Taken together, the combined average markup on GAP and window-etching products was 170 percent. By comparison and according to the National Automobile Dealers Association, new car sales in 2015 had an average markup of 3.4 percent.
This article originally appeared in Speaking Out Weekly News.