Overcharging car buyers based on how they look? That’s illegal

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It’s unfair and illegal to increase the amount someone ends up paying to buy or lease a car based on their race or how they look. But that’s how the FTC says a group of three auto dealerships in Rhinelander, Wisconsin allegedly overcharged some of their customers. Read on to learn more about the case — and what you can do to get a fair deal when buying a car.

According to the FTC and the State of Wisconsin, the Rhinelander dealerships unfairly and illegally charged American Indians hundreds or even thousands more in costs than non-Latino White customers. The dealerships also piled on charges for add-ons like optional gap insurance policies and service plans that were spread over time, making it hard for customers to spot. And in some cases, the FTC says the Rhinelander dealerships falsely told their buyers that the add-ons were required to buy or finance the car.

Now the Rhinelander dealerships and their general manager will have to stop these allegedly discriminatory and illegal practices and pay $1.1 million to reimburse customers who paid hundreds or even thousands of dollars more in financing costs and add-on charges.

Some illegal tactics are hard to spot, but here’s how to avoid overpaying for a car.

• Shop around for financing. Dealership financing often comes with marked-up interest rates. It’s not your only option. Start with banks, credit unions, and other financing companies. Get pre-approved and use that offer to negotiate with the dealer.
• Read the sales contract and financing agreement carefully. Make sure the terms you agreed on match what is in the contract. Get answers about any extra fees you don’t recognize or want.
• Walk away if you’re not getting what was promised. You don’t have to take the deal if you’re not satisfied.

Learn more about your rights when buying or financing at ftc.gov/cars. If you believe a dealership discriminated against you or charged hidden fees, please file a report at ReportFraud.ftc.gov.

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