I know that Pixar approached Marin to play the part and he agreed, so I don't believe there was any audition. Ramone is, in part, based on the kind of characters that Marin made famous in the 70s and 80s, which is why they asked for him specifically. There is a lot more nuance to this and probably zero chance I will cover it correctly, but what you are seeing as stereotypes, are traits that really developed to define a specific community and that the community itself defined as a way of expressing itself outwardly. Low-riders were a defining trait of chicano car culture in the 1940s, so their inclusion in the movie, and Marin's involvement are both impacts that community made on the story.
I will though absolutely allow that boiling down a culture into those defining traits and perpetuating certain stereotypes does not constitute adequate inclusion. Times have changed and the definition of inclusion has changed with it. It's not merely acceptable to have a culture represented in a story, but instead necessary to tell stories from that culture itself. In time, the depiction of Ramone in Cars may come under a new light, just as Splash Mountain did, as not the best way to represent a community. For now though, there is still a little nostalgia and pride in seeing what might come across as a stereotype in Ramone, a nostalgia that comes in part from a time when any inclusion from a community was a win.