Many car dealers are selling add-on products including service contracts and extra insurance at enormous markups to consumers, and Hispanic shoppers paid far more than other groups, a new study found.

The National Consumer Law Center analyzed the sales records for 3 million add-on products sold from September 2009 through June 2015.

The nonprofit organization found that dealers were widely inconsistent in what they charged consumers, leading some shoppers to get great deals while others paid more for the same product.

The price inconsistencies led the NCLC to conclude that Hispanic shoppers were being charged higher prices than non-Hispanics, the group said. The study did not address why Hispanic buyers ended up paying more.

Among the study’s findings:

  • The average markup for all customers for service contracts (including extended warranties) was 83 percent. It was 325 percent for window etching, when a dealer puts the vehicle identification number on the window as a way for police to identify the vehicle’s parts if it is stolen.
  • In May 2013, one Michigan dealer charged customers from $349 to $5,000 for the same window-etching product.
  • The average percentage markup for a service contract was higher for Hispanics than non-Hispanics in 44 states, according to the study.

As a result, the study authors say, these pricey add-ons increase the overall price of the vehicle without an equal increase in the car’s value, resulting in owners who owe more than the car is worth for a longer period. That results in higher defaults on car loans.

“Our analysis demonstrates the negative consequences of opaque and inconsistent pricing of auto add-on products and the urgent need to bring transparency and consistency to this market,” says the report’s primary author, John W. Van Alst, director of the NCLC’s Working Cars for Working Families project.

In general, Consumer Reports advises against add-on products such as VIN etching, rustproofing, and fabric protectant. Often, these products simply aren’t needed and could be replicated for a fraction of the cost, especially if you consider the impact of those add-ons on financing costs. Likewise, CR suggests that shoppers focus on buying a reliable car, rather than invest in an extended warranty.  

The NCLC said it is seeking:

  • Car dealers to post the available add-ons and their prices on each car. They are seeking to make those prices non-negotiable to prevent the dealer from offering discounts to some customers but not others.
  • Amending the federal Equal Credit Opportunity Act regulations to require customer documentation to include race or national origin for nonmortgage credit transactions, as is currently required for home mortgage transactions, to reduce discrimination.
  • State and federal officials to investigate discrimination in the pricing of these add-on products and crack down on dealers where discrimination is found.
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Jared Allen, a spokesman for the National Automobile Dealers Association, says dealers should be able to negotiate the prices of what he called “voluntary protection” products.

“Voluntary protection products are incredibly valuable for millions of consumers—just ask consumers who were made whole by gap insurance on the total loss of their vehicles due to hurricanes Harvey and Irma,” Allen says. “But the NCLC’s approach of limiting consumer discounts on these products would only make them more expensive and harder to obtain for many consumers.”

In order to determine which shoppers were Hispanic, the NCLC looked at surnames to identify likely Hispanic consumers, says Van Alst, the study author. He says the group used a list of Hispanic surnames created by the Fed’s Office of Fair Lending Enforcement, based on the U.S. Census identification of common Spanish surnames.

“The Federal Reserve Board uses this technique in fair lending examinations to code for ethnicity. Some entities that provide financing also use this technique internally to monitor for compliance,” he adds. 

Using service contracts as an example, the study details 13 states in which the differences in both absolute and percentage markups was statistically significant. In these states, the average markup for Hispanics exceeded that of non-Hispanics in both flat dollars and percentage increase: Arizona, California, Connecticut, Kentucky, Massachusetts, Minnesota, Missouri, Nebraska, New Jersey, New York, Oklahoma, Texas, and Virginia. Several of the states have large Hispanic populations.

“The National Consumer Law Center findings are incredibly troubling,” Marisabel Torres, senior policy analyst at UnidosUs, an advocacy group for Latinos, said in a statement. “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.”

David Friedman, director of cars and product policy and analysis for Consumers Union, the policy and mobilization division of Consumer Reports, says discrimination in the auto marketplace should be investigated by state and local law enforcement.

“Whether you call it a discount or a markup, discriminatory pricing is wrong,” he says. “All consumers should receive fair prices and honest dealing when they buy a car. The practices outlined in this report are very troubling."

Van Alst says it’s not clear why Hispanics were charged more. But he says allowing inconsistent pricing from dealer-to-dealer makes it possible.

“Giving dealers the discretion to charge different consumers different prices for the same product, and building incentives to charge high prices into their compensation systems, is a recipe for abuse,” he says. “Since one consumer does not know what other consumers are charged for similar items, consumers have no ability even to detect whether they are being charged more than other consumers for the same products.”