This is a tactic a dealer uses to increase the price and/or payments to include either aftermarket items or pre-delivery services. The National Consumer Law Center provided a webinar on this topic that explains how this is done and why it violates the law.
As an example, the price of the car is $25,000. The salesman or the finance manager (the smooth-talking guy you see after the salesman) then tells you that included in the price is a warranty or some other product or service, such as an appearance package or etching. You think that you really got a bargain and the salesman is a nice guy. Guess again. The final price or payment includes (has packed into) the extra product or service.
In this case this case the price was really $23,500, with a warranty for $1,000 and etching for $500, hence the $25,000 purchase price. They never gave you the chance to decline the products because you were never aware that you were purchasing them BUT you did know that you were getting them. Usually there would be product information, but the price box would be left blank, leading you to believe it was FREE. If the salesman says it’s free you are probably getting defrauded. Sometimes
it’s really severe and the dealer does not disclose that you are purchasing the product, or the payment is just bumped up (referred to as buying air). Dealers have actually been indicted for this conduct. I litigated a case where the finance managers were getting a huge commission on these products and were packing them into many of the deals to maximize their own profit. They got caught and got fired but it was too late for the customers.
One of the other tactics which is considered price packing is where the dealer quotes you a price well in excess of what the car should cost. The difference between the actual cost of the financing and the price which is quoted to you is called a bump. Then once the bump is in the deal the salesman and or the finance manager negotiated additional products or services to be included in the transaction or they just increase the price and or agreed value of the vehicle if a lease. These tactics can be very difficult to discern if you are not an expert in the field. Usually only after an extensive review of the paperwork as well as a review of the dealer's internal quotes from the finance companies and reviewing their software can you determine if there is been price packing for sure. However, there are many signs of price packing to lead a reasonable person to conclude that the dealer had improperly quoted prices.
So, the first question
should be how you can stop this price packing from occurring at the dealership when you buy a car. There are certain things you can do to stop the dealership from engaging in such conduct. While there are some tips it is not simple as the dealership salesman is the trained expert in selling cars and the sales process. Therefore, it is imperative that you change the dealership sales process through proper preparation and altering the salesman’s presentation to you.
The simplest attack on payment packing would be not negotiated by payments. You need to negotiate by purchase price. If you negotiate by purchase price it is necessary to have access to the Internet or some type of calculator that can calculate payments based on an amount financed. Thus, if the dealer gave you a price of $30,000 and the interest rate you can calculate the payments yourself. However, if you permit the dealership to give you the payments there is no way that you can have a firm concept of the interest rate for the purchase price. If the dealership or to quote you a payment of $300 you have no idea what the interest rate is you have no idea how many months it is you certainly do not know the price of the vehicle.
If they insist on negotiating on payments what you need to do is have some sort of access to the Internet or calculator to input the payments and the interest rate to calculate the amount financed. You can reverse engineer the dealerships process to determine the amount of the purchase price.
This also has another significant advantage in that the salesman does not even know you are doing this. Thus, you can confront him with this information, and you will have a significant advantage in the purchasing process. Just remember an attempt to outsmart the car salesman is a very difficult thing to do and you need to be very prepared. If you are not prepared do not even, try it and the best advice would be just to negotiate by quoting purchase prices and worried about the financing and the payments later.
Car salesmen have many ways of deceiving consumers and this is just one method. It’s hard to imagine, but you should bring a lawyer with you when you buy a car.
The New Jersey Consumer Fraud Act provides a resource to the consumers who have been a potential victim of consumer fraud. Price packing and other deceptive practices are actionable in New Jersey under this law if you have sustained damages. The trip about price packing cases is demonstrating damages by demonstrating increased purchase price. Increased purchase price can be considered an ascertainable loss or consequential damage. These damages would be tripled, and attorney’s fees would be awarded. The New Jersey Consumer Fraud Act requires the triple damages and attorney’s fees and ardent not discretionary. The amount of attorney’s fees is discretionary, but attorney’s fees must be awarded. An application to the court must be made by the attorney. The act also provides for injunctive and other equitable relief if applicable.