F & I PRACTICES AND MENU MISHAPS THAT CAN SINK YOUR DEALERSHIP

Keith Whann
Whann & Associates

Motor vehicle dealers are increasingly becoming targets for disputes about improper disclosures and deceptive trade practices and, in particular, dealership F & I practices.  The negative reputation continues to get fuel from media programs that foster the consumers’ perception that misrepresentation is rampant in the motor vehicle industry.  This is occurring even as many dealers are working diligently to make their sales and F & I practices more disclosure and consumer friendly.

The goal is to ensure that all of the Dealership’s products and services are offered to all of the customers all of the time.  Claims frequently raised by consumers are related to allegations that the dealership’s representatives failed to make disclosures or made inconsistent disclosures. Examples of these claims include that the dealership included the cost of optional products or services that the consumer did not know he was purchasing in the price of the vehicle (commonly referred to as “payment packing”) or was told that he had to purchase them in order to complete the transaction. 

A popular F & I trend geared toward avoiding consumer claims regarding deceptive F & I practices is “menu selling”.  Using a menu selling approach can help ensure Dealership F & I products are presented in a consistent and professional manner.  When done correctly, a menu selling approach should provide the customer with complete information about the F & I products and services that are available at the dealership and create a dialog where the customer is involved in the decision-making process.  Typically, customers are more satisfied if they feel like they have made an intelligent, well informed purchase decision selecting products and services they truly desire. 

Let’s be clear though, menu selling will not, in and of itself, eliminate all of the dealership’s potential exposure in the F & I department.  In fact, it may raise a number of additional legal and regulatory issues for the dealership.  I have reviewed many F & I menus for Dealers that contain incomplete information about the products and services offered, inappropriately make reference to products as “insurance” or “environmental protection products,” improperly use the word “waiver,” and make reference to a “package” when in fact all of the products and services being offered by the dealership are being sold individually.

The more thorough the menu, the more protection it should afford the dealership. The menu presentation should let customers know that all products are optional and will not affect their ability to obtain financing. It should include all of the products and services available with consistent descriptions of each one and, at a minimum, how much the product or service will increase the customer’s monthly payment.  Finally, the menu will often contain the ability for a customer to designate the products they elect to purchase and those they decline.

To avoid potential pitfalls, dealers should evaluate their current sales process to determine if the sales strategy supports a full disclosure selling effort.  The dealership’s written policies should stress ethical and honest sales practices and detail how performance will be regularly assessed.  These written policies, along with an ongoing audit process of completed deals, can be effective defenses for the Dealership to unfounded consumer complaints.  Dealers should also consider how F & I Department pay plans are structured and their potential impact on the issue.

Traditional dealership sales paperwork can also play an important role in this area.  Using documents such as an F & I Product Purchase Confirmation in conjunction with an F & I Menu gives the dealership another opportunity to discuss the F & I products and services that are available, while reinforcing that the F & I products that have been offered to the consumer are optional and verifying that the consumer had the opportunity to read the applicable brochures, applications and contracts and to ask questions if any of the information is unclear.  Finally, utilizing a Delivery Confirmation, as opposed to a “We Owe” or “Due Bill”, gives the dealership a final opportunity to obtain a customer’s acknowledgement that he had the opportunity to review the documents and understands the entire transaction.

Dealership sales and F & I paperwork should be reviewed and updated at least on an annual basis, as well as anytime the dealership modifies its product offerings, to ensure that all paperwork accurately reflects the products and services available at the dealership.  If you find a few questions you need answered along the way, visit the Car Counselor section of the www.KeithWhann.com website.  Keeping your F & I materials up to date and employees properly trained can go a long way in protecting your dealership from unwanted legal exposure, while increasing overall customer satisfaction and dealership profitability in the process.