Many F&I managers believe bundling is their best friend.
By bundling, they can offer customers several F&I products in a package costing less than buying each product individually. A bundle might consist of an extended-service contract, key fob protection and GAP, all for a single price.
Dealers say bundling often leads to more sales than an a la carte offering.
But a dealership lawyer warns it can also lead to more problems.
"There is nothing wrong with packages, but unless you can show that the customer knew he or she could buy the product a la carte, you're running the risk of a packing claim," says Mike Charapp of Charapp & Weiss in McLean, Va.
A packing claim alleges products are packed into the deal without the knowledge or consent of the customer, often resulting in a higher loan payment, Charapp says.
Charapp warns that customers could argue they didn't understand what they were paying for because it was all lumped together without adequate disclosure.
A lawsuit for failure to adequately disclose the cost of credit under the federal Truth in Lending Act carries a fine of $1,000 per claim, he says, adding that "it's the attorney fees that are always a problem" and there is a potential for a class-action lawsuit.
Another problem dealerships could face is customers suing because they didn't buy a product they later needed -- an extended-service contract to cover a transmission repair, for example. The customers could argue they had the misimpression that the service contract could be bought only with a maintenance contract and dent repair, neither of which the customers wanted, Charapp says.
Charapp has not seen many lawsuits based on packing claims, but he says "bundling" is "a new term for an old practice of doing packages."
The solution is to use a menu that offers products a la carte. That kind of menu, Charapp says, "can help with proof of the necessary disclosures."