The magazine’s compliance guru has a few words for dealerships that have desk and sales managers computing and quoting payments.
In the not-too-distant past, regulatory oversight of the vehicle-acquisition and -funding processes didn’t start until the customer was turned over to the F&I manager. Not so today. When a prospective buyer opens the showroom door, a bevy of laws come into play. If you count dealer-placed ads, the regulatory scrutiny starts even before a customer steps onto the lot.
This month I’d like to focus on the practice of having monthly payments computed by a desk or sales manager. When that happens, two qualifiers come into play: The first is when the payment is computed after the customer’s credit history has been obtained and a lender tier has been identified. The second is when a payment quote is offered before a copy of the customer’s credit report has been received.
In both situations, the basis on which the monthly payment is calculated must be limited to the amount of money required to be financed in order to consummate the sale. The factors that determine this amount will vary widely from one deal to the next. They include the negotiated vehicle price, the appraised value of the trade-in plus any negative equity, and the retail cost of any accessories or products identified and agreed to by the customer as an integral element of the purchase price.
What the payment cannot include is an undisclosed amount of money to generate a “leg” to aid the F&I person in the sale of aftermarket products. The term quoted must also be commensurate with the repayment period normally used to fund the purchase. Shorting the term by six months — quoting payments for 54 months — to establish a “leg” will be exposed during an investigation of in-store practices. A review by a regulator or plaintiff’s attorney of a representative sampling of deals identifies repayment terms of 54 months as quoted by the desk manager, when a subsequent assessment reveals that virtually every customer rolled out of the F&I office with 60-month installment sales contract terms.
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F&I and Showroom
