Years ago, I was walking the NADA showroom floor when I approached the booth of a vendor presenting an e-desking solution. I posed the question, “Is there a way to add leg to the deal, let’s say like $40?” Without hesitation the vendor showed me how easy it was to pack the payment in the software.
The practice of payment packing has been around since I was a toddler. Back then, dealerships utilized the 4-square to negotiate a deal and quoting payments $30-$40 higher than the actual payment was the norm. It wasn’t until 15 years later the term “payment packing” evolved and the National Association of Attorneys General declared payment packing as a deceptive sales practice. Around this time, dealerships around the country began establishing a desking process and using e-desking solutions.
The e-desking solutions were more aesthetically pleasing and easier for the customer to follow. There was a higher probability the numbers presented from the e-pencil were correct and not easily manipulated like they were with the manual 4-square. The e-desking solution assisted with staying in compliance with the dealership’s desking policy and helped the sales process.
What more can a dealer ask for to ensure their employees are staying compliant to the desking requirements? What if you establish a solid desking policy, and you determine a couple rogue employees took it upon themselves to create their own policy?
Real Life Example of Payment Packing
This dealer is on top of their compliance initiatives. It has policies in place, provides training, and regularly audit its deals. During a routine audit, it was noted that the first pencil was missing from the deals. It was the dealership’s policy to save all pencils used to negotiate the deal. The dealer dug a little deeper and determined the pencils were being deleted from the desking system.
The general manager contacted the vendor, who was able to retrieve archived worksheets. After a review of the archived worksheets, they uncovered a loophole in the software where one could add product or a dollar amount to a line item in the software, but the product and dollar amount was not disclosed on the pencil that was presented to the customer. That first payment was inflated, and the customer was unaware of products or additional markups included in the payment quote.
The subsequent payment quotes provided the correct numbers to the customer. They jumped through all these hoops to continue this scheme, only to determine it wasn’t producing an increase in numbers.
The dealership relied on a strong desking policy, and by using an e-pencil solution, it felt it was on the right path to compliance. The staff was trained and signed off on the policy. Unfortunately, this did not prevent these employees from manipulating the first pencil and attempting to hide their scheme.
Once the dealer became aware of the employee’s deception, it took action. After terminating the rogue employees, they pulled the remaining employees into a room, reiterated the company’s desking policy and stated if anyone wanted to use their own approaches, they would be also be walking out the door. As they started using the adopted policy, they found deal time decreased, sales increased, and products sold per deal increased.
This case study proves while one can find ways to manipulate the software to hide a crime, the software will ultimately uncover and verify the crime. It is recommended to have an audit process in place to ensure compliance of the desking process. The dealership should periodically review the settings in the desking software to ensure they haven’t been “adjusted” to fit an agenda.
Also, conduct a structured internal and external audit of deal samplings to verify an e-pencil paper trail is available and to ensure the desking process set forth in the dealership is intact. These periodic audits reassure the dealer that the employees are on the right track.
Finally, when shopping for an e-pencil solution, ask the vendor if they provide the option for the dealership to vet and audit the pencil on any sample deal in the system.
Following these simple recommendations puts the dealership one step closer to solid, defensible compliance strategy.
Penny Bell is an associate with gvo3 & Associates. gvo3 & Associates is a consulting firm who specializes in developing and implementing a compliance management system for dealers around the country.
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