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R.I.P. Payment Packing

The AFIP’s executive director says it’s time to say goodbye and good riddance to a relic of F&I’s past. He explains why ‘a little wiggle room’ hurts new-car gross and puts sales at risk.

November 2015, F&I and Showroom - Feature

by David Robertson

It’s time to pay our last respects to payment packing. What started out innocently as “a little wiggle room” has morphed, in some dealerships, into a bastardization of payment quoting and F&I product pitching processes.

When a customer asks how much a vehicle costs, just tell him how much the damn thing costs, not the selling price plus however many hidden dollars you need to sell an aftermarket product. The regulators expect it, consumers deserve it and ethical business practices dictate full and accurate disclosure.

Besides being duplicitous, payment packing is counterproductive and a relic of the past. Let me explain why.

First, payment packing negatively impacts new-car gross and puts sales at risk. Statistically, nearly 90% of all car buyers fall into one of two categories: For the vast majority, the purchase decision is based strictly on whether they can afford the monthly payment. For others, the question is, “On a cost-benefit scale, is what I expect to gain from the vehicle commensurate with the monthly obligation?” The anticipated benefits can range from basic utility to the “Wow” factor. In other words, “How much will this car’s gas mileage save me annually on my commute?” vs. “How impressed will my golf buddies be if I drive up in this vehicle?”

In nearly every case, the purchase decision is contingent upon the amount of the monthly obligation. If the payment is packed, the selling price of the vehicle is artificially higher than it should be. If the bump causes the monthly payment to be more than the customer can afford or is willing to pay, he has two options: He can keep grinding on the salesperson — further reducing the gross to hit his purchase decision trigger point — or shop elsewhere.

A $35 bump on a 72-month contract is $2,520, which is a significant amount of money. As salespeople, we’ve all had prospective buyers walk for less than $35 a month or $2,520 in trade difference. Personally, I wouldn’t sell cars in a store that packed payments, even if I received a small piece of the F&I pie. If I get paid for selling cars — and doing so ethically — I should have the opportunity to optimize my income potential from each sale. Let the F&I person give it his or her best shot to do likewise.

In an era of über-documentation, manipulating the payment mouse will prove to be more difficult. The CFPB isn’t pushing for digital transactions to save paper. Its objective is the ease of conducting dealer data audits. However, in this case, the digitization sword cuts both ways. Software will be available for the dealer to self-audit each transaction at the time the sale is consummated.

Who benefits from the packed payment, anyway? From a dollars-and-cents perspective, the best the customer can do is break even. Using the numbers above, the customer overpaid $35 per month for the car and underpaid the same amount for a VSC. If the reduced retail price of the VSC was the key to the purchase decision, the customer benefited from the coverage. However, all too often, some or all of the packed dollars are posted to the F&I gross — with a portion, in many cases, ending up in the pay vouchers of those “desking” the deals.

The payment packing holdouts have two choices: They can quickly and quietly lay the practice to rest or, judging from reports in the trade press, they can learn how expensive it will be if they keep doing it.

In the simplest terms, payment packing means the seller is deceptively overstating the monthly payment to a buyer, typically for the seller’s enrichment. Logic dictates that this business practice will not be tolerated. The 49 states without a payment packing statute will likely follow California’s lead in expressly prohibiting the practice. As evidenced by recent actions, there are state and federal laws already on the books to make it a prosecutable offense.

As an industry, we are paying dearly for questionable choices made by some dealers in the past. And we can’t effectively put the past behind us until we fully abandon its relics.

David Robertson is executive director of the Association of Finance & Insurance Professionals (AFIP). Email him at


  1. 1. Mike Wells [ November 16, 2015 @ 02:49PM ]

    Excellent article,

  2. 2. Mike Kaul [ November 17, 2015 @ 09:54AM ]

    It's always amazing to hear and read all the information about how bad dealers are for trying to pack all the deals. I will agree dealerships can bastardize the deal, but I also believe the "Art of Structuring the Deal" is gone. (Lack of Training) Selling the your produce has left us for the sake of the internet and social media You know, the selling the value of the Dealership, Salesperson, and of course the products/vehicles. If you do not tell you story you really have lost...Dealers believe Management and Salespeople do not need training any longer; the reasons for which I have just stated. It is truly a sad day when dealers and managers believes the real true salesmanship is gone and no longer needed. What do you have...Oh Yes "The Order Taker".

    Remember this: People don’t buy “What” you do…People buy “Why” you do it!


    “We are what we repeatedly do. Excellence, then, is not an act but a habit.”

  3. 3. Bubba B [ November 19, 2015 @ 01:46PM ]

    What is your guys' feeling on conditioning the customer to a higher payment prior to going into F&I. Say the customer has a 690 FICO and you're reasonably sure a bank (or CU) you do business with frequently will approve the customer at 5%, but you quote the customer at 6.5% and they agree. When they get into F&I, the finance manager then tells the customer that they did some more research and the customer actually qualifies for a 4.9% rate, which over 60 months this reduces their monthly payment by $40 (this is just an example, I have not done the math on this). Then comes the inevitable pitch that since the previous payment was affordable to the customer, they may wish to "enhance" their ownership experience with a service contract, Road Vantage, etc.

    My feeling is that this is an unethical business practice, but it does not constitute payment packing. Any thoughts?

  4. 4. David [ November 19, 2015 @ 04:20PM ]

    What's excellent about this article? Stop being a hipocrite.


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