Even after lawsuits, warnings and news stories decrying payment packing in the finance & insurance department, the practice continues.
Payment packing — charging for unordered products and services — is not only unethical, it's illegal.
Some dealerships still resort to it. Conversely, several have implemented safeguard procedures to mandate full disclosure. Dealer advocates are preaching compliance, the end of payment packing and the establishment of menu selling.
Many dealership staffers claim they aren't aware they are using illegal payment packing methods. They've always used the same techniques. They work. Their customers don't complain. In fact, their customers agree to the monthly payments and sign the contracts.
How can what they're doing be considered unethical, especially if they are pressured to sell products and take the sting out of the charges by breaking them into more palatable monthly payments?
Maybe these finance managers are simply in denial. Maybe they continue to use payment packing because it's hard to teach an old dog new tricks.
A great number of dealership veterans were trained to payment pack. For them, it remains the easiest way to close the deal and sell their products.
They get their customers to close on a monthly payment figure, while including products in the payment. Only after the payment is closed do they mention the products that are included in the payment.
They assure their customers that the selected products will increase the base payment by “only a few dollars” each month. The customers, who are accustomed to thinking in terms of only a monthly payment and not the total picture, jump at the chance to take advantage of the products.
What they aren't told is that the products will likely add more than a few dollars, perhaps as much as a $30-$40 each month over years.
Some finance managers say they use a “menu.” It may look like a menu, but it's definitely not.
If you ask these finance managers how they present the menu without a base payment, they are likely to say they offer product options with alternative payments. But, their customers are not told what the barebones vehicle payment is without those included products.
Other finance “experts” tout a menu that allows the F&I manager to present options without disclosing payment terms as long as the base payment and annual percentage rates are disclosed. Both methods are deceptive.
Here's the catch: these finance managers tell their dealers they are using a “menu” to present products. They believe they're off the hook and in compliance. But, if the base payments, terms and annual percentage rates are not disclosed prior to products being offered, it is “payment packing.”
What is thought to be menu selling is merely option selling. Option selling is simply another form of disguised payment packing. Customers are entitled to know what their monthly payment is without products included, and know it during product negotiation.
Short-term thinking that lacks integrity ultimately minimizes income; long-term thinking that shows character increases trust and profits.
No one in car sales has to break laws to break sales records. Rather than devising ways to undermine the system, smart dealerships are thinking of effective ways to maximize profits while maintaining a loyal, satisfied, long-term customer base.
Rebecca D. Chernek is president and CEO of FYIFI Inc., specializing in F&I sales and management. She can be reached at [email protected]
