Payment Packing

Packing All But
the Kitchen Sink

Payment packing is by far the most common of the car buying scams that I've witnessed over my years in the car business.

Payment packing is the deceptive act of presenting inflated monthly car loan payments to customers during negotiations.

This act actually becomes illegal once:

  • A credit report has been obtained
  • The sale price has been disclosed
  • The term of the loan has been disclosed
  • and The finance rate has been disclosed.

An example would be a customer with excellent credit, buying a vehicle for $15,000, financing for 60 months at a finance rate of 5.9% should have a monthly payment of $289.95. (tt&l excluded)

What the dealership will do here is to inflate your new car loan payments to let's say $320.00 a month and try to close you on the higher payment.

The reason behind this is to "help out" the finance manager in hopes that the products they will try to sell you will not appear as expensive for you to purchase.

How Does This
Benefit The Finance Manager

Let me show you an example from the finance managers point of view...

Assuming that a finance manager were going to present you with the option to buy an extended warranty and GAP insurance and that adding these coverages to your real car loan payments would bring your monthly payments up by $40 per month.

Using the base car loan payment of $289.95 from above you would now see the full increase of $40 and have monthly payments of $329.95.

Using the packed payments from above your monthly car loan payments would only go up a whopping $9.00.

Which one would you prefer to try and sell?
An easy $9.00 a month or a much tougher $40.00 a month?

I'm sure you can see the importance of payment packing for the finance manager and how it can positively impact the profits for the car dealer.

Where The
Big Scam Comes In

There are two ways that I've most commonly seen payment packing turn into an out right illegal scam...

Your Payment Is Filled Up.
Here, a finance manager (an unscrupulous one) will find a way to fill that $40 worth of leg with products that you don't know are there and certainly never agreed to purchase.

Leg is another term to describe payment packing. It's basically a way to state how much the payment has been packed...A sales manager talking to a finance manager might say "you've got $40 worth of leg..." to let him know how much fluff there is in the deal.

By the way, $40 a month over 72 months is $2,880!

There is big money in scams...Be careful.

If you decline any products that are offered to you in the finance office a good finance manager should lower your packed payment to your base payment and not try anything tricky.

A really good finance manager that is obeying the law should disclose your base payment to you before offering you any products.

Products Are Forced
When the finance manager forces products on you, they will use lines like:

"The only way I could get the deal approved was with warranty and GAP insurance."

That's an outright lie!!!

No bank can require (by law) a customer to purchase warranty or GAP insurance.


"I can get you a better approval with a better rate with the warranty and GAP insurance, because they protect the lender."

Again, a lie and illegal!

Please don't read into this thinking that extended warranties and GAP insurance are bad, because in my opinion they are not, but they are optional products and should be offered as such.

How To Avoid
Payment Packing

All the tricky games can easily be avoided by asking them to:

  • Disclose the sale price
  • Disclose the total amount financed
  • Disclose the term
  • Disclose the estimated finance rate

By having them disclose all of this upfront, they have to give you an accurate payment or they risk a visit from the Department of Motor Vehicles or the Attorney Generals Office.

An even easier way to avoid them playing games with your monthly car loan payments is to arrange your own auto loan.

By arranging your own financing you'll eliminate payment packing by not having to negotiate payments at all, because you'll essentially be paying cash. Take a look at my Auto Loans page for more information on good credit loans and my Bad Credit Auto Loans page for subprime credit.

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