Auto Fraud: Loan Packing


It is that time of year when most people are looking for deals in order to save money on various purchases, and car buyers are no exception. A person buying a car through financing likely wants to have their monthly fees associated with the car purchase as low as possible. Some car dealers may seek to deceive a car buyer into thinking that they are getting a great deal, when in reality the dealer is the one getting the deal. One way a car dealer can manipulate the price of a car to get the buyer to pay more in monthly fees is through a trick called loan packing.

What is Loan Packing?

Loan packing is a process in which a dealer includes various add-on expenses to the monthly cost of buying a car, without telling the car buyer of the added costs. In quoting the monthly cost of the car, the dealer gives the buyer the price with the added on costs, and only later as the financing documents are being signed may they mention the real cost separate from the add-ons. The dealer may then convince the buyer that the add-ons are a great price at the extra cost.

These additional expenses, such as gap insurance or additional warranties, may not necessarily be bad for the consumer, however, they may be unnecessary for the consumer, or the consumer may be able to get the same options cheaper elsewhere. Some of the services and products forced on the buyer may also be duplicated from those offered by the car manufacturer. In some cases, the dealer presents the additional costs as requirements from the lender, or presents them as packaged deals that are supposed to be cheaper for the buyer. The general theme of loan packing is that the buyer ends up with a lot of often confusing service, without any clear idea of the real monthly cost of the car, without the add-ons.

When it comes to avoiding loan packaging, or at least being able to recognize it when buying a car, the best approach is to conduct extensive research before going to the dealership. While a buyer may not be able to research every aspect of the car deal beforehand, a person can research the real prices of the cars, and any warranties that may be offered. If possible, a buyer should also try and secure loan financing before getting to the dealership. However, these preparations cannot protect a buyer from a pressured sale from the dealership staff.

How Else Can I Avoid a Loan Packing Scheme?

You can also avoid loan packing by watching out for both front- and backend add-ons that you may not need. The frontend additions include adding accessories that do not come standard with the vehicle, and increase the cost of the car. When possible, a buyer may be better off asking for a model of the vehicle that does not have the additional features. In the case of the back end additions, a buyer who feels that they may need additional warranties or insurance should do some research and see if the services would be cheaper from other sources. A buyer should always protect themselves by asking for the sales price without any additional fees, as well as the exact terms of the loan.

When a dealer’s loan packing tricks turn illegal, such as lying to the consumer that the additional terms were necessary to secure financing, the consumer should report the dealer to the appropriate consumer protection government offices such as the Attorney General of the consumer’s state. In some cases, the consumer may be able to sue to get an illegal deal reversed. If you have been scammed in an illegal loan packing scheme, consult with an attorney as to your rights.

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