When you finance a vehicle at the dealership the finance office is usually the last place you visit. The finance manager is the person that goes over your payments with you, and finalizes your loan. You are trusting this person to act in your best interest for what is usually a very large purchase. Second only to a home mortgage for most people. While there are many good finance managers that will do just that, (myself included) there are an unscrupulous few that will take advantage of that trust. These finance managers are guilty of "payment packing" and it's illegal.
- To most people it may seem the finance managers main function is to handle the paperwork, but that's not true. Our main responsibility is to produce more income for the dealership. Being a finance manager is one of the most stressful jobs in a car dealership. We not only have to handle an overwhelming amount of precise paperwork, but we have the added pressure to sell extra products such as Gap Insurance, Service Agreements, Life Insurance and Disability Insurance. We have certain quotas we are pushed to meet every month. It may surprise people to know, but we get the majority of our income from commission just like the salesmen. Because of pressure to sell these products, a few will resort to whatever means necessary to meet their quotas. That leads to the problem of payment packing.
- Payment packing is when a finance manager quotes you a payment that is higher than your real payment in order to make his extra products appear to cost less than they do. Or, they may quote you a payment that already contains one of the products, and after you agree to the payment dispute that the product is already included. In my business this is called an assumptive close. Assume you want the product and go ahead and quote it in the payment. Both ways are not only unethical, they're illegal.
- A finance manager may quote a payment of $ 315 a month, then tell you the extended service agreement will only be $ 8 dollars more a month if you would like to buy it. That sounds great! Who would not want to just pay $ 8 for the extra coverage. In truth your base payment was really just $ 300, so it's really costing you an extra $ 23 a month. Or, you may not know anything about the service agreement until they start going over it when you sign paperwork. You ask about it being extra and they tell you it's already included in the payment they told you earlier. Either way you were not given the opportunity to know the exact cost of the product or make a decision based on true facts.
- How do you avoid getting ripped off by payment packing? I know what you're thinking. I'm not buying anything extra. Many of the products offered in the finance office are very beneficial, and save customers money. Do not arbitrarily say "I'm not buying anything" before even listening to us explain the benefit. For example, I always purchase gap insurance. A good finance manager will not only tell you your base payment, but also the total amount you are financing without any extras included. You should be told this first, before any discussions about extras. Then, if you decide to purchase an extra product you will know the true difference in payment. The best way to avoid payment packing is to look over everything you are asked to sign. The price of anything extra is required to be disclosed on the contract, so carefully review the contract and ask a lot of questions if you think you are being deceived. I never have any objection to a customer taking a few minutes extra to look everything over, or ask me Questions about something they may not understand. Honest finance managers have nothing to hide and will not rush you through the process.