Driver's Guide

What is Payment Packing Scam [Dealer Crime Watch]

Howdy, Driver? What is payment packing on a car? Payment packing is also known as loaded payments scam or leg and it occurs when a dealership quotes additional services without informing the buyer.

What is payment packing

Ethically, when a dealership quotes a payment, it should be for the vehicle only. It is unlawful for a dealer to quote a packed payment, which indicates that you have been cheated immensely in the deal.

Looking out for a payment packing scam is one of the tips I point out regarding talking down a salesman. When a dealer quotes a payment, ask whether the payment is for the vehicle you want to buy. If you are financing the car, ask whether the rate you are given is the lowest rate for which you qualify.

What is Payment Packing?

Payment packing is when an automobile dealer quotes and deceives a buyer to agree to an inflated payment.

Typically, the sales department sends the transaction to F&I (Finance and Insurance) without informing the buyer about the terms of the deal or the APR (Annual Percentage Rate). A scrupulous dealer also includes additional charges such as huge prepping bills and pinstriping in the transaction.

Dealers regard payment packing as getting a little leg and it is a deceptive strategy that enables the sales manager to make F&I products/services seem cheaper than the actual cost. For instance, if your actual payment is $410 on a loan for 60 months, a dealer might deceive you to pay $460 each month by increasing the interest rate without your knowledge.

Is Payment Packing Illegal?

Yes, payment packing is illegal when the buyer is not informed of additional quotes in their payment.

In a 2015 P&A publication titled “The Return of the Leg”, Terry O’Loughlin, the Director of Compliance for Reynolds and Reynolds asks whether anyone does not know that payment packing is illegal. Moreover, the NCLC (the National Consumer Law Center) addresses payment packing as a widespread and significant form of auto fraud.

Payment packing is illegal in all the states. Apart from being a deceptive strategy to profit from vehicle sales, with payment calculators available online, it is harmful to the automobile market.

It is quite uncalled-for how some insincere modern dealerships manage to reiterate packed payment scams today.

Meanwhile, payment packing becomes an auto fraud when:

  • The customer is aware of the sale price.
  • The dealer discloses the term of the loan.
  • The dealer discloses the finance rate.
  • The dealer obtains and reviews the customer’s credit report.

Some dealerships use archaic quoting methods that may be interpreted as payment packing. For example, a dealership in Texas reportedly used the average 12-15 percent APR to quote monthly payments for customers without a credit tier in hand.

How Payment Packing Works

In this section, I illustrate an instance of payment packing at a dealership.

Let’s assume that the desk instructs a car salesman with a first pencil quoting payment of $300 to $400 including title, tax, pinstriping, TT&L (Treasury Tax and Loan), and license with $20,500 trade difference.

If the dealership uses a 6% interest rate on 60 months, the payment is $396.32 monthly. At 48 months, the payment is $481.44 and at 36 months, the payment is $623.65.

The payment increases by a few dollars 45 days to the first payment, which means the dealership quoted the deal correctly. And it also depends on the terms and number of days to the first payment. If the interest rate is not falsified, it is not payment packing.

However, if the buyer was quoted at 3% previously for the same amount of payment, the monthly payment would be $368.36 at 60 months, $453.75 at 48 months, and $596.16 at 36 months respectively. It means that the monthly payment was increased and the current payment becomes a packed payment.

Moreover, if the buyer is quoted a $396.32 payment on 60 months at a 6% interest rate, but without their credit report, it is not a packed payment. It becomes a packed payment if the dealer obtains the buyer’s credit report and lender approval to ascertain that they qualify for 3% but fails to disclose it to the buyer.

Also, although the doc fee is legal, if a car dealer includes it in the contract without disclosing it to the buyer, it is payment packing.

In another instance, if the desk includes TT&L and pinstripe charges in the $368.36 monthly payment on 60 months at a 3% rate, but the salesman forgets to disclose it to the buyer, it is a packed payment, even though the figures in the record are correct.

A scrupulous dealer typically uses this tactic when they realize that the buyer calculated the payment already. If the buyer asks why the payment is different, the salesman will counter trickily that the payment includes the license fees, tax, pinstripe, title, TT&L, etc.

Somehow, the manager escapes with the lies, especially if the buyer does not know the amount. This tactic also allows the salesman to avoid shame before the buyer and the manager will not want to dabble with the payment.

If the buyer okays the payment, the dealer could make a hundred to a thousand dollars of profit depending on the amount in the deal.

Signs that the Manager Packed Payment

A manager packs payment if they:

  • Inflate the price of the vehicle.
  • Falsify the interest rate.
  • Include over $2,000 warranty or back end products (extended service contract, financing, disability insurance, interior, and exterior vehicle protection, etc.) to the deal without informing you.
  • Write down a higher car payment.
  • Decrease the amount of the down payment without informing you.

How to Avoid Payment Packing

Below are the ways to avoid the payment packing scam:

Buy a Car Online

The dealer competition is fiercer online and it is even easier to obtain multiple quotes and select the best. Meanwhile, I have written an article to help you win the car auction online.

Know the Sale Price

Before you go to negotiate with the dealer, research the actual cost of the vehicle, including the MSRP online.

Know the Trade-In Value

The rule of thumb is to negotiate the cost of the vehicle first before informing the salesman of a trade-in. Now, request the trade-in value and make sure the dealer does not falsify the figures.

Note the Estimated Finance Rate

If you know the estimated finance rate on a car, it makes it easier to calculate the estimated payment when you contact the dealership. It also keeps the dealership from packing payments.

Be Aware of the Loan Term

Read through the paperwork carefully before you sign. Also, make sure that the listed products and services are what you are paying for only.

Get Your Auto Loan

You can avoid payment packing by arranging your auto loan. Your auto financing outside the dealership helps to eliminate payment packing and you do not have to negotiate the payments. You may check and compare banks or credit unions for the best quotes.

How Can a Dealer Avoid Payment Packing Accusations?

The easiest way a dealer can avoid being accused of payment packing is to implement a method allowing for first-pencil quotes based on the actual transaction experience of the store over a few months even before you obtain the customer’s credit report.

Final Thoughts

Before you pay for a vehicle, make sure the dealer discloses the sales price, trade-in vehicle cash value, total amount financed, loan term, interest rate, and additional services such as pinstriping.

As a customer, you are entitled to accurate quotes because you are paying for the vehicle. Even the law, sincere F&I managers, and ethical sales practices demand disclosing every quote to the consumer.

If you fear that the dealership may somehow manage to pack payments on you, you can eliminate their chances by not using the dealership’s financing option.

Finally, if you are certain that the dealership packed payments, you can report to the Federal Trade Commission. You can also inform the attorney general of your state or your local consumer protection office.


Add-ons and Loan Packing: How and Why Car Dealers. NCLC.

The Return of the Leg. P&A.

Latest posts by Bernard Juchli (see all)

Bernard Juchli

Bernard Juchli is an experienced racer, mechanic and team owner who trusts Avon Tyres.Bernard is the lead driver and force behind his Big Dog Garage Race Team. He is the General Manager and Chief Mechanic of Jay Leno’s Garage. Bernard and his crew of seven are responsible for all repairs, restoration and fabrication of Jay’s incredible automobile and motorcycle collection.

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