In our last ACE Space article, I discussed understanding the basis and need for dealer law. As a reminder, dealer law is the policies and procedures dealersimplement as a compliance best practice when the same rules are not required by state or federal laws.
Implementing and using a menu process to sell voluntary protection products is probably the best example of a dealer law.
Many agents have either recommended or sponsored a menu system. And like it or not, the dealer ofttimes looks to the agent to ensure the F&I managers are properly using the menu and ask for a menu audit.
A menu audit is more than looking in the deal file, seeing that a menu is in the deal, and reporting the percentage of menus in file. There are four components to a menu audit: disclosures, memorializevehicle sale, sell products, and paper trail.
As you read further, keep in mind that the use of a menu is optional. Outside of California and Minnesota, there are not state or federal statues outlining the disclosures and processes outlined below. Everything I offer up is consistent to any testimony in litigation support that these practices are considered industry best practices.
Industry-Standard Menu Process
In my testimony, I would outline the industry-standard menu process as a two-part process. Part One is a disclosure of the agreed upon sales terms and presentation of all available products. Let’s call this the “presentation page.”
Part Two is the affirmation of the final agreement, which may or may not include VPPs. This page should list the base payment terms, the agreed-upon products and prices, the products the customer declined, and the final payment terms.
While I refer to paper and paper trail, menus can be digital, if the digital form meets all four components and clearly demonstrates the customer’s optional acceptance of VPP.
These disclosures should be a part ofevery menu and should be vetted upfront before agreeing to a vendor’s menu. There should be statements affirming that:
- Purchase of any products areoptional and are not required toobtain financing.
- Some products can be purchased separately.
- The purchase or declination ofproducts will not affect the APR.
- Signature or initial lines next to base payment and final payment.
Memorialize Vehicle Sale
The first step in the menu sales process most agents teach is for the F&I manager to memorialize the vehicle sale or clear the top of the menu. The word-track I hear most often: “These are the terms and conditions you can take delivery of the vehicle today with approved credit.”
The top of the presentation page should disclose the agreed to price, down payment, trade, rebates, and resulting amount financed. The base term, APR, and payment must also be disclosed.
The customer should initial next to the base payment, providing the best proof in litigation that the customer was told what she could take delivery of the vehicle without the purchase of any VPP. Without the customer’s initials next to the base payment, the debate in court becomes a he said/she said and the dealer has a lesser chance of winning that argument.
There is ongoing chatter on some industry chat boards on the topic of menus and whether a menu is a sales tool or a compliance tool. Of course, it is both, so let’s focus on the sales tool aspect of menu disclosures.
You may or may not subscribe to the mantra of every available product offered to every customer. … But I do.
In a menu audit, we expect to see every available productoffered on the presentation page. Once products are selected, we look to the “accept declination page” to validate the customer’s agreement to products purchased, the agreed-upon price, and the new monthly payment with products.
The best defense I can lay out in litigation support is apaper trail that confirms the transaction’s transparency and thecustomer’s agreements to terms.
Finally, a menu audit must confirm the product selection on the accept declination is consistent with the products purchased on contracts. This requires that:
- The premiums are the same on all final documents.
- The APR is consistent between all final documents, with no need to disclose money factor on a lease.
- A new menu has been completed on a re-contract, even if the terms did not change.
I’ll admit that a thorough menu audit takes more time than confirming the percentage of deal files that contain a menu. Improved product sales and a compliant paper trail are therewards.
Good luck and good selling.