I was recently privy to a very old dealership practice that is banned but most certainly continues to be exploited in the modern era.   

In the Housewives Beware section of 1953’s “The Household Encyclopedia,” most of the indicated scams regarding advertising, bait-and-switch deceit, contract fraud issues and evanescent asking prices continue unabated to this day.  

Similarly, there are over 150 ways that F&I managers both past and present can hornswoggle consumers when retailing a vehicle. They were also utilized in 1953. The same old frauds continue. Despite the passage of time and increased enforcement, dealer fraud endures, especially the type addressed in this article: payment packing. 

In the latter part of the 1990s, numerous cases were being prosecuted regarding this practice, as there are now. State attorneys general in 1999 decried and condemned it by a resolution that every attorney general signed. By resolution, payment packing was characterized, ipso facto, as an unfair and deceptive trade practice.  In part, the Resolution reads: 

WHEREAS, “packing” is the deceptive practice of misrepresenting monthly payments to consumers during auto sales and lease negotiations in order to facilitate the sale of automobile related products and services; and ….et cetera…. 

WHEREAS, states continue to pursue vigorously law enforcement, business training, and consumer education to deter deceptive practices in the automobile industry:….et cetera…. 

I was asked to offer my opinion to the Florida attorney general about this practice and resolution before he would support it. 

Payment Packing Defined 

There are various ways in which a consumer can be “packed.” 

In the typical scenario, the desk or sales manager quotes a payment that may be, for example, $50 higher than the actual monthly payment, based upon the price of the vehicle, number of months the retail installment sale contract or lease will be paid, and an assumed interest rate or lease rate.  

This disparity is sometimes referred to as the “leg.”  The leg is then used to add after-market products so that the payment is fully accounted for. The F&I manager can gratuitously tell the consumer that this added product is “free,” which it clearly is not.   

A more sophisticated method for payment packing is rate packing. The desk quotes the consumer an exceptionally high interest rate that exceeds what the consumer’s creditworthiness should demand, and sometimes even the maximum allowable reserve.  

This interest rate disparity, or leg, is then exploited by the F&I manager. He or she could then “negotiate” it down to the highest amount for reserve purposes but still allow enough leg to add ancillary products for “free” or for “pennies per day.” 

A variation on this is term packing, in which a payment is quoted without specifying the number of months. The additional months of payment being secretly added are filled with voluntary protection products.  

For example, the actual term may actually be 36 months, but the final contract indicates 48.  Those additional twelve months of payments are effectively paying for the added ancillary products. Once again, the F&I manager can lie to the consumer and tell him that these added products come at “no additional charge.”     

Lease packing is a further derivative of this practice, for which 39 state attorneys general filed and settled a national case in 2003 against a major lessor.  

The scheme worked as follows: Lessees wished to terminate their leases early and purchase their leased vehicles. The captive lessor would not quote the payoff but direct the consumers back to their originating dealers. Instead of quoting the true payoff, those originating dealers would inflate or “pack” the payoff by an additional amount. Consumers wouldn’t know that a premium was being added to the payoff.  

Even more forms of packing exist. 

Jettison the Flotsam  

Payment packing cases are not difficult for aggressive attorneys general to pursue. They do require accounting labor, but those costs would ultimately be paid by the dealership in the settlement.  

Dealer principals are urged to conduct internal audits to determine whether any employees are engaging in this old practice. General managers, sales managers and F&I managers can all be sued as defendants in these cases, along with the dealership itself, a sobering consideration.