Navigating the world of automotive finance can be a complex journey, and it's crucial to be aware of practices that are not just frowned upon but are outright prohibited. In this blog post, we shed light on some key practices that are a strict no-go in the finance office, aiming to empower both consumers and industry professionals with the knowledge needed to ensure fair and ethical transactions.
1. Blank, Signed Documents: A Risky Move
Signing documents in blank, with the intention of filling in terms later, is a practice fraught with risk. This unethical maneuver is strictly prohibited, emphasizing the importance of completing all paperwork before obtaining a customer's signature.
2. Cash Back to Customer: A Potential Legal Tangle
Offering cash back to customers from the dealer may seem like a goodwill gesture, but it often breaches dealer-lender agreements and can even be considered bank fraud. It's a practice best avoided to maintain the integrity of financial agreements.
3. Completing Documents After the Fact: Full Disclosure Matters
Just so you know, every document presented to a customer for signature must be completed beforehand. Incomplete paperwork can lead to misunderstandings and legal complications, making it imperative to ensure transparency in all transactions.
4. Credit Card Down Payments: Proceed with Caution
While down payments are common, using a credit card for this purpose may violate dealer-lender agreements. It's essential to be aware of the terms and conditions to avoid any unintended violations.
5. Forgery: A Crime Not to Be Tolerated
Forging customers' signatures is a serious crime with legal consequences. Maintaining ethical standards in the finance office is crucial to uphold trust and ensure a lawful business environment.
6. Front-End Improvement: Fair Pricing Matters
Artificially increasing an agreed-upon vehicle sale price through front-end improvement is considered an unethical practice. Transparency in pricing is vital to building trust with customers.
7. Including Undisclosed Voluntary Protection Products: Stick to the Script
Salespeople and F&I managers have distinct roles. It's crucial for salespeople to refrain from including ancillary Voluntary Protection Products in price quotes, leaving that responsibility to the F&I manager.
8. Inconsistent Product Pricing: Maintain Uniformity
Consistency is key in pricing Voluntary Protection Products. From the menu to the final documentation, ensuring uniformity in product pricing across all forms establishes a clear and reliable paper trail.
9. Kicking the Trade: A Deceptive Practice
Encouraging customers to return a trade vehicle after a deal is funded, under the guise of a high prior loan balance, is deceptive. Transparency and honesty should be the cornerstones of all transactions.
10. Menu Manipulation: Keep it Honest
Manipulating fees, trade allowances, and other factors to artificially inflate the base monthly payment is strictly forbidden. Honest and transparent dealings are essential in maintaining customer trust.
11. Missing Enrollment Forms: Documentation Matters
Ensuring that customers sign enrollment forms for every purchased product is a fundamental practice. It not only completes the paperwork but also serves as evidence of the customer's acknowledgment and consent.
12. Payment Packing: Honesty in Quotes
Quoting a payment higher than the actual amount required for the vehicle purchase is an unethical practice. Customers should be provided with accurate and transparent information to make informed decisions.
13. Photocopy Military ID: A Federal Violation
Making photocopies of military identification cards is a direct violation of federal statutes. Respecting and adhering to legal standards is imperative in maintaining a trustworthy business environment.
14. Power Booking: Avoid Inflating Vehicle Values
Presenting nonexistent options to finance sources to inflate the value of the vehicle is known as power booking. This practice undermines trust and should be avoided to uphold the integrity of transactions.
15. Product Stuffing: Obtain Customer Consent
Including a product in the amount financed without the customer's knowledge or consent is known as product stuffing. Transparency in all aspects of the deal is vital for ethical and fair transactions.
16. Scooping Rebates: Disclose Available Rebates
Failing to disclose consumer rebates as a reduction to the amount financed and absorbing them into profit is considered scooping rebates. Full disclosure ensures transparency in pricing and builds customer trust.
17. Shotgunning Multiple Vehicle Purchases: Transparency is Key
Signing or cosigning for multiple vehicles without the finance source's knowledge, known as shotgunning, raises ethical concerns. Open communication with finance sources is crucial to prevent any misunderstandings.
18. Signature on File: Obtain Appropriate Signatures
All applicable documents must bear the customer's actual signature. Designations like "Signature on file" are not acceptable, emphasizing the importance of obtaining appropriate signatures for legal and ethical reasons.
19. Straw Purchases: Uphold Truthfulness
Falsifying information to finance sources, specifically through straw purchases, is a serious violation. Ensuring that the person purchasing and driving the vehicle is a party on the agreement is essential for truthful transactions.
20. Trading Rate for Product: Agreement Integrity Matters
Once the APR is agreed upon, it cannot be lowered to facilitate the sale of ancillary products. Upholding the integrity of agreements is paramount in maintaining trust with customers.
21. Yo-Yo Transactions: Clarity in Deal Structures
Avoiding spot-delivering deals that financial institutions might not purchase, leading to recontracting, is crucial. Clarity in deal structures ensures that customers make informed decisions from the beginning.