Disclosing the Payment Packing Scam
Many dealers may try to practice the payment packing scam on unsuspecting consumers. The payment packing scam is the fraudulent act of presenting high monthly car loan payments to customers during negotiations and once a credit report is obtained, the sales price, the term of the loan, and the finance rate has been disclosed it becomes illegal. They essentially increase the monthly payment by including “back end products” without the buyer’s knowledge.
These may include an extended warranty, rust protection or other services that a buyer may not want. The only thing the consumer will pay attention to is the monthly payment, assuming this is only for the purchase of the car. Even $2,000 in add-ons will only make a payment increase by about $33, which most consumers will not even notice. Never the less this $33 can add up to $2376 for a 72-month term.
Other tricks of the trade include, falsely increasing your interest rate a few points, showing less for your trade than what it is worth, increasing the amount of the car you want to purchase, decreasing your down payment, or even writing a higher monthly payment and trying to get you to close on it.
The payment packing scam increases the gross profit on the car sale. Also, it increases the commission for the Sales Managers, and the car salesman, and the profit for the car dealership.
A finance manager may tell you they could get your deal if they add a warranty and GAP insurance. Or because a warranty and GAP insurance protect the lender the deal will go through. By law, no bank can require a customer to purchase these extras.
To avoid the chance of this very common scam happening, arrange for financing through a bank or credit union. This will avoid any payment negotiations because your payments will be to the lender and not the dealer.
You must ask the dealer abou the car price, the total amount financed, loan terms, and interest rate. Once you know the details there can be no loan packing.