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Truth or Consequences

October 2006, F&I and Showroom - Feature

by Mike Tamas - Also by this author

Legal Compliance: Although this phrase is the retail automotive industry’s current hot topic, the buying public generally considers Finance & Insurance and legal compliance an oxymoron. In the public’s eye, our industry has a reputation of conducting business in a way that is neither legally compliant nor ethical. Unfortunately, this perception is, more than likely, a reality in many dealerships today. On the bright side, just as many dealers are working hard to prove this image wrong.

As more dealers jump on the bandwagon to become legally compliant, the focus typically turns to the Finance and Insurance department, which has a reputation for being non-compliant with today’s complex legal issues. In an effort to comply, many dealers have started using menu selling to offer the consumer valuable F&I products. The idea behind using a menu is to eliminate payment packing. Finance and Insurance departments that use menus also receive the benefit of additional profit, simply because 100 percent of the products are offered to 100 percent of the customers, 100 percent of the time. Not only does this increase profit, but it also provides the added benefit of absolving a dealership from accusations of discrimination —another area of concern in today’s industry.

However, what many dealers fail to recognize or overlook is that payment packing typically begins long before the customer meets the business manager. That’s right, payment packing and other unfair and deceptive trade practices typically begin during the process of negotiation. One of the most common violations practiced by many dealerships has to do with computer defaults. Many dealerships default the sales manager’s computer to quote payments that include F&I products. These defaults typically include vehicle service contracts, credit insurance, and Etch. If the computer has product defaults, payments quoted from the computer will be packed. When confronted with this topic, sales managers are typically quick to say that although the computer defaults the products, they take them out before quoting a payment. What happens on a busy Saturday when many deals are worked simultaneously? Is it possible the removal of these products may be overlooked? One of the easiest ways to start on the road to legal compliance is to remove all defaults from sales department computers.

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