So, what did you think of Tom Hudson’s column last month on showing the base payment on the menu? He basically confirmed what many of you have always thought, that there is no law that specifically addresses what needs to be on the menu. But, like Hudson, I would never recommend anything that goes against an industry best practice.

Instead, I wanted to use this month’s column to explain my reason for asking Hudson to take on that topic. It’s not that I wanted to debunk what is, in my opinion, a good practice to follow. All I was after was an answer to a question that comes up often on our F&I Forum and other social networks I frequent.

But I have to be careful. As Hudson wrote, states like California do have rules addressing the base payment as it relates to F&I. That’s why I also asked David Robertson, executive director of the Association of Finance and Insurance Professionals (AFIP), to weigh in.

Here’s what Robertson said about the menu as a compliance tool: “A menu is simply a mechanism employed to alert customers to the full array of owner-indemnification products offered by the selling dealer. In its simplest form, it is nothing more than a marketing tool.”

He went on to say that more sophisticated menus include declination sections to “affirm the customer’s decision to not purchase certain items.” And, well, that’s what California requires under the Automobile Sales Finance Act (ASFA), as noted by Hudson last month. That rule was designed to rid the state of payment packing by requiring that dealers hand car buyers a separate, written disclosure showing their monthly payment with and without the F&I products purchased.

Now, that rule went live in California on Jan. 1, 2006, the very same day the California Car Buyer’s Bill of Rights went into effect. Many industry insiders at the time feared those rules would spread like wildfire to other states. And I think this mythical base-payment-on-the-menu rule was born out of that fear, especially since the ASFA specifically calls out products sold in the F&I office.
Decades ago, the Truth in Lending Act’s Regulation Z was enacted to promote the informed use of consumer credit by requiring that terms and costs associated with borrowing are calculated and disclosed. And according to Robertson, it requires that the dollar amount disclosed to the customer is limited to the cost of owning the vehicle after taking into account the amount allotted for the trade-in, any dollar amount still owed on the trade-in, cash down, and any rebates or discounts.

Sounds like a sales issue, right? Well, Robertson added one caveat: “In some cases, a customer may elect to purchase an aftermarket product or service contemporaneous with the acquisition of the new or newer vehicle, in which case the price of this item will be included in the agreed-to figures.” That still puts the Reg. Z disclosure after the menu is presented, right? Well, not so fast.

“For credit-challenged customers for whom the need to find a willing lender is an integral and crucial component of the vehicle ownership experience, the F&I practitioner may become actively involved in the purchase process,” Robertson noted.

Robertson said he recommends showing the base payment on the menu because it lends instant credibility to the F&I process, allowing the
“always-skittish car buyer to track a vehicle’s agreed-to purchase price from the sales department-issued buyer’s order to the F&I office-initiated [menu] presentation.”

So, yes it’s a best practice, but that doesn’t mean this publication is recommending anything other than what is accepted industrywide. However, I don’t think we can get better at doing things the right way if we operate under false pretenses, which is why I wanted an answer to this debate.

See, I believe we as an industry do need to come to a consensus on how things should run in the F&I office. I’ve covered too many industries to know that an industry that’s not’s unified in how it operates leaves itself open to scrutiny. And that’s why I’m always supportive of associations that aim to bring consistency. Because when regulators start poking around, the first people to whom they turn to learn how things work are associations like the AFIP and the National Automobile Dealers Association (NADA). And if what they say doesn’t match up with what we’re doing, well, you know what happens next.

Look, I don’t know about you, but I’m feeling pretty good heading into 2013. Consumers and the auto finance industry have finally shaken off 2008 and 2009. I guess I want to do my part to make sure nothing disturbs our drive to recovery. 

About the author
Gregory Arroyo

Gregory Arroyo

Editorial Director

Gregory Arroyo is the former editorial director of Bobit Business Media's Dealer Group.

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