Auto Financing Scams

Learn how to avoid one of the biggest auto financing scams — ‘packed payments’

The biggest auto financing scams:
packed payments and back end profits

In order to let you know about the biggest auto financing scams, we asked Peter Humleker, consumer advocate, consultant and author of the excellent book “Car Buying Scams, Auto Dealer Executive “Breaks Code of Silence!” to write an exclusive article for us on the topic.

Peter told us that ‘packed payments’ are certainly one of the biggest auto financing scams — and most people don’t know anything about them.

So, here’s Peter’s article on this huge auto financing scam:

If you are unfortunate enough to have to deal with a car salesman when you buy a car, then you’re most likely going to encounter what are called “packed payments.”

When your sitting in the showroom and the sales person has given the paperwork to his manager, what typically happens?

The “closer” or salesman comes back to the table with huge auto financing payments.

For example, you only wanted payments of no more than $350.00 per month but now the payment is $421.00!

This is often because the payments are “packed.”

What a “packed” payment means is that the payment includes the extended service contract, life and disability insurance, GAP insurance, and what ever else the dealer wants to add into the payment so that it is easier to sell it to you in the Finance Office.

Your payment might really be $357 but they tell you it is $421.

What they don’t tell you is the payment of $421 has the extra back end products already added into it.

If you agree to the payment, when you get in the Finance Office and find out that it includes the extras, it is much easier for the Finance Manager to get you to agree to buy the extra back end products.

For example, let’s say you agree to a car payment of $421 per month. Then you get to the Finance Managers office and he tells you “Yeah, your payment is only $421 per month and the great news is that it includes the 6 year extended service contract, GAP insurance, and life, accident and health insurance, as well as paint and interior protection!”

Many people will just go ahead and accept the payment thinking they are getting a great deal because they are getting all of the extra’s and their payment never changed or went up!

Dealers make lots of extra money packing payments.

However, the truth is that giving a packed payment is illegal in most states — yet car dealers continue to use this auto financing scam anyway.

In the example above, the difference between $421 and $357 is $64. This means that the Finance Manager got (what is called in the business) $64 in “leg.”

The Sales Manager packed the payment $64 and therefore gave his Finance Manager $64 in leg to work with in order to sell the customer the back end products.

Copyright Peter M. Humleker Jr. Reprinted (exclusively) with permission.