Payment packing is deception -- 'it's not OK'

There's a stubbornly held belief around some dealerships that salespeople can get away with "payment packing" -- traditionally defined as adding extras to a monthly payment quote without divulging them -- as long as the F&I manager eventually discloses to the customer what went into the payment.

But F&I trainer George Angus warns that a misleading price quote in the showroom can get the dealership into trouble with state and federal regulators even if the base price plus extras are itemized later in the F&I office.

Angus, head trainer for Team One Group in Scottsdale, Ariz., spoke with Automotive News Special Correspondent Jim Henry.

You wrote recently that payment packing is an easy target for regulators. What do you mean?

One of main things they're looking for is deceptive practices. In practical terms what they're really looking for is the way payments are quoted and negotiated -- payment packing. Payment packing, that's what they're after.

This sounds like something that's been around forever.

We started working, training, with people in 1990s and early 2000s. Myself, I started in the industry in the 1970s -- and we used to pack payments.

How do you define payment packing?

The customer asks what the payment is going to be and the salesman gives them a price that includes credit life, or maybe some other products, and doesn't disclose that. So the payment is $480, say, but that includes 30 bucks worth of extras.

Sometimes it could even be 30 bucks worth of air. In that sense it's a negotiating tactic, so that if they have to lower the payment they can do it without really giving anything up.

Doesn't the payment have to be disclosed in detail?

The sales department would try to get around that by putting the base payment on the menu so that when the customer gets to the F&I department, eventually it's disclosed.

That doesn't make it all right?

If there's deception during the negotiation, that's what regulators are looking for. They're looking for documents that show the base payment wasn't disclosed properly.

The regulators in the past, in the early 2000s, when the FTC was doing the enforcement, they had sent around these secret shoppers. They don't actually buy the vehicle.

How do you avoid this?

You need a process where it's built in, there's a form the customer signs before any F&I products are presented which documents the price was properly disclosed the first time.

Again, what you're describing happens on the showroom floor, before the customer ever reaches the F&I office.

Right. It's amazing how many dealerships think this gets them off the hook, but the debate over whether it's disclosed on the menu or not is irrelevant to what regulators are looking for. If the dealership ever gets audited, it does no good.

This is something you probably preach all the time, but it still happens?

There are still people out there packing payments today. I am constantly dealing with dealerships where we take them away from that belief that as long as they disclose it when they get into F&I, that's OK. It's not OK.