Heretofore there has been mixed evidence on whether price discrimination by new vehicle dealers results in women and minorities paying systematically more for new vehicles. Ayres and Siegelman (1995) performed a careful paired-audit study and found that white women and black men and women received higher initial and final offers from new vehicle dealers (with the effect being statistically significant for minority buyers but insignificant for white female buyers). Goldberg (1996) examined data from the Consumer Expenditure Survey and found no evidence that minorities or white females received smaller discounts. Both studies are subject to criticism: Ayres and Siegelman observe offers, not transactions. Goldberg is forced to measure discounts from the suggested retail price rather than the preferable dealer markup or profit, has to drop many observations because of missing data in the CES, and does not directly observe trim-level and additional options.

Our study addresses the question of whether women pay more for new vehicles, but is silent on whether minorities pay more. We examine data from a new J.D. Power and Associates database which comes directly from dealers’ financial computer software programs and yields information on vehicle gross profit and profit from sales of ancillary products. The contemporaneously collected transaction information reveals that new vehicle dealers engage in extensive price discrimination: The standard deviation for vehicle gross profit is as high as $1,128 for a Cadillac Deville (which has an average vehicle gross profit of $2,506). Price discrimination is in evidence by age group: Older buyers appear to generate higher vehicle gross profit, but lower profits for the sales of ancillaries. Middle aged buyers generate higher profits for the dealer in the sales of service contracts and credit life insurance. In addition, buyers who pay cash or arrange their own financing generate significantly lower gross vehicle profits and service contract income for dealers. So while we find a great deal of evidence suggesting dealers attempt first-degree price discrimination, we find no reliable evidence that the attempt at price discrimination results in women paying significantly more for vehicles or ancillary services.