5 Biggest Reasons You Can't Trust The Dealership
About this episode
“Can you trust a car dealership?” The host answers “It’s no.” He frames distrust as a business-model problem: dealerships rely on “a consumer being less educated,” and commission-driven incentives push salespeople and finance managers to steer deals toward higher rates and add-ons. Pricing can shift via financing markups, mandatory add-ons, and variable fees like dock fees, while trade-in values and out-the-door numbers change day to day. Negotiation is “information is asymmetric by design,” so the “only person that got your back is you.”
In this video I break down the five real reasons you cannot trust a car dealership, and none of them are because dealers are evil or trying to scam you.The answer is simpler than that. Dealerships have built a business model that relies on you being uneducated, and the less you know walking in, the more money they make.From commission pay structures to hidden finance markups, I go through every layer of how this system is designed and why your interests and the dealer's interests will never fully align.If dealerships wanted to fix this tomorrow, they could. They just won't.
profitability
"The sales manager is almost always paid on a dealership level [295.9s] based on the profitability of the dealership. [298.1s] How profitable are they,"
Profitability is how much money a dealership makes relative to its costs. The speaker claims dealership leadership pay is tied to profitability, which can create incentives that don’t align with the customer’s best interest.
finance manager
"The finance manager, which I was in finance, [303.6s] and we can have a whole conversation [304.9s] about what I did or didn't, but what I will say is this."
The finance manager is the person at the dealership who sets up your loan and paperwork. They may also try to sell extra add-ons that can increase what the dealership earns.
A finance manager (often called the F&I manager) is the dealership employee who handles the paperwork and financing options after you pick a car. They commonly earn income from dealership-arranged loan terms and from add-ons like warranties and other products.
rate
"Finance managers are paid, talk about this for a moment, [328.5s] to convince you to spend more on a rate. [330.3s] If you, for the same bank, the same product, [332.8s] the same credits here, if I can convince you [334.5s] to do an 8% rate versus a 6% rate, I get commission."
Here, “rate” means the interest rate on your car loan. A higher rate usually makes the loan cost more over time.
In this context, “rate” means the loan interest rate offered for your auto financing. A higher rate increases the total cost of borrowing, and the speaker claims the finance manager’s incentives can push customers toward higher rates.
credits
"If you, for the same bank, the same product, [332.8s] the same credits here, if I can convince you [334.5s] to do an 8% rate versus a 6% rate, I get commission."
In car financing, “credits” are lender incentives that can change the terms of your loan. The speaker is saying that even if the lender setup is the same, the dealership can still push you toward a more expensive deal.
“Credits” refers to financing incentives or pricing adjustments tied to the lender’s program (for example, how the dealership’s arrangement affects the final loan terms). The speaker uses it to argue that, with the same lender setup, the finance manager can still steer you toward a higher rate.
commission
"if I can convince you [334.5s] to do an 8% rate versus a 6% rate, I get commission. [337.9s] That's not working for the best of the consumer."
Commission means the dealership employee gets paid based on what they sell or what deal you end up with. If the dealership makes more money on your financing, they may earn more too.
Commission is performance-based pay tied to sales outcomes. In dealership finance, commission can be linked to the interest rate you accept and to the dealership’s profit on financing and products.
warranty
"If I convince you to spend more on a warranty, [342.0s] more on a product, more on anything, I make more money. [344.8s] The general manager is the same way."
A warranty is an add-on coverage plan that can extend protection beyond the vehicle’s factory coverage. Dealerships may sell warranties as part of the finance process, and the speaker claims higher spend on warranties can increase dealership profit and sales pay.
profit margin
"They understand the exact profit margin on every single product in the back office, finance, warranty, and they can compare the deals…"
Profit margin is how much money the dealer makes on the sale. It’s basically the dealer’s “profit amount” compared to the price they sell the car for.
Profit margin is the dealer’s profit expressed as a percentage of the sale price (or as profit relative to cost). In car deals, it’s often discussed as the difference between what the dealer pays/earns and what the customer is charged.
information invoice
"The information invoice and MSRP, all of the information is asymmetric. You don't have all of that information."
The invoice is what the dealer pays (or is billed) for the car. Knowing it can show how much the dealer could potentially lower the price from the sticker.
The “invoice” (often called the dealer invoice) is the price the dealer is billed by the manufacturer for the vehicle. It’s important because it helps explain how much room a dealer may have to discount from MSRP and how negotiation can be influenced by what the dealer knows versus what the buyer knows.
MSRP
"The information invoice and MSRP, all of the information is asymmetric."
MSRP is the “sticker price” the manufacturer lists for the car. The dealer might sell it for more or less than that number.
MSRP (Manufacturer’s Suggested Retail Price) is the sticker price a carmaker recommends dealers sell the vehicle for. It’s a baseline number, but the actual transaction price can be higher or lower depending on incentives, negotiation, and dealer pricing.
information asymmetry
"The information invoice and MSRP, all of the information is asymmetric. You don't have all of that information."
Information asymmetry is when one person knows more than the other. In car sales, the dealer often has pricing details the buyer can’t easily check, so it’s harder to know if the deal is truly good.
Information asymmetry means one side in a transaction has more or better information than the other. In car buying, dealers may know pricing details, profit structure, and deal history that customers can’t easily verify, making it harder to judge whether a quote is fair.
add-ons
"What the price you advertised and came in didn't include the add-ons that are mandatory. Oh, we do also have a $1,200 dock fee."
Dealers may tack on extra items (add-ons) that weren’t included in the advertised price. These extras can raise what you actually pay at the end.
In dealership sales, "add-ons" are extra products or charges added to the deal beyond the advertised vehicle price. They can include things like fees and optional packages, and they often change the total out-the-door cost.
dock fee
"Oh, we do also have a $1,200 dock fee. So sorry, we forgot to mention that one. That does change the price. But another dealership down the road had an $85 dock fee."
A "dock fee" is a dealership charge for moving the car from where it arrived to the store. Different dealers can charge different amounts, so the total price can change.
A "dock fee" is a dealership charge tied to getting the car from where it arrived (often from the port or transport) to the dealership. It’s a line-item fee that can vary widely between dealers, which is why the final price can feel like a moving target.
out-the-door price
"There's so many things where the price is a very much a moving target. You can't go through and you genuinely just say, hey, the price of the car is $40,000. Take it or leave it, right? Everybody pays $40,000."
The "out-the-door price" is the final total you pay to drive the car home. It includes the car price plus taxes and all the extra fees, so it’s the best number to compare between dealers.
The "out-the-door price" is the total amount you pay to complete the purchase, including the vehicle price plus taxes, registration, and dealer fees/add-ons. It’s the number that matters for comparing deals, because the advertised price alone can be misleading.
Toyota RAV4
"...an walk into the dealership, pay $40,000 for that RAV4 that you just paid $44,000 for."
The Toyota RAV4 is a small SUV made for everyday driving and family use. People talk about it a lot in car-buying because the final price can change based on discounts and extra charges at the dealership. That’s why you might hear different numbers for the same RAV4 deal.
The Toyota RAV4 is a compact SUV known for being practical, efficient, and widely available. It often comes up in dealership and pricing discussions because it’s a high-demand model where small changes in discounts, add-ons, or trade-in numbers can noticeably affect the final out-the-door price. In a negotiation-focused episode, it’s a good example of how the same vehicle can end up costing different amounts depending on the deal structure.
hold back
"They can do hold back from the manufacturer. They have stair step and volume bonuses."
“Holdback” is a manufacturer rebate paid to the dealer after the car is sold. It can be part of how the dealer makes money even if the deal looks cheap.
“Holdback” is money manufacturers pay back to the dealer after the sale, based on the vehicle’s invoice/contract terms. It’s one reason dealers can have profit even when the sticker price looks low.
stair step and volume bonuses
"They can do hold back from the manufacturer. They have stair step and volume bonuses."
These are extra payments from the manufacturer to the dealer when they sell enough cars. The more cars the dealer sells, the bigger the bonus.
“Stair step” and “volume bonuses” are manufacturer incentives tied to how many vehicles a dealer sells, often with thresholds. As sales increase, the dealer earns higher bonus amounts, which can influence how aggressively they push certain deals.
trade in spread
"They have trade in spread. They make money on the amount of money that you're trading in if you take it under value."
“Trade-in spread” is the gap between the price you’re offered for your old car and what the dealer can sell it for. If the offer is low, the dealer keeps the difference.
“Trade-in spread” is the difference between what the dealer offers you for your trade-in and what the dealer expects to get when they resell it (after reconditioning/fees). The dealer can profit by undervaluing the trade-in relative to its resale value.
markup
"Add-ons, markup and dock fees are all just a few reasons on how they make money and are able to move that money around and spread it."
“Markup” means the dealer charges more than their starting cost. That extra amount is often where profit is hiding.
“Markup” is the amount added on top of a base cost—commonly the vehicle’s acquisition cost, parts, or financing terms. In dealership deals, markup can show up in multiple places, making the final price harder to compare apples-to-apples.
profit on 19 different things
"You don't know where all the money is coming from and you don't understand where the profit is coming from and when you're trying to profit on 19 different things, guess what?"
The idea is that dealers can make money in many small ways at once. If the profit is hidden across lots of line items, it’s harder to tell what you’re really paying for.
The speaker’s point is that dealership profit can be spread across many line items (financing, trade-in, add-ons, fees, etc.). When profit is distributed across lots of categories, it becomes harder for buyers to see the true “deal” and compare offers.
Consumer Lending Act carve-out
"And what 2013, they specifically carved themselves out of the Consumer Lending Act, which made it so dealerships could or nobody could markup rate. It was Dodd Frank."
Sometimes laws limit how much profit a dealer can make on car financing. A “carve-out” is an exception that lets some dealers keep doing it anyway.
The speaker is referring to a regulatory change that affected how much dealerships could add profit through financing terms. A “carve-out” means dealerships were excluded from certain limits, so they could still mark up the interest rate in some situations.
CARS Act
"Three years ago, the CARS Act came through, which is really simple. The price online is the price you pay."
The CARS Act is meant to make car deals more transparent—especially the price you see online. The goal is that the dealer can’t change it later with extra pricing games.
The CARS Act is discussed as a rule aimed at making car pricing more straightforward in the online-to-in-store buying process. The key idea mentioned is that the online price should be the price you pay, reducing the ability to add hidden costs through dealer-controlled pricing or financing structures.
The price online is the price you pay
"which is really simple. The price online is the price you pay. This is too hard for business."
It means the number you see online should be the number you actually pay. The concern is that dealers might change the final price once you’re already committed.
This phrase summarizes a transparency requirement: the advertised online price should match what the consumer is charged at purchase. In dealership contexts, the opposite is often “bait-and-switch” style pricing where the final out-the-door number changes after paperwork begins.
checkout line
"[733.4s] when I'm going to end the checkout line [735.0s] to sign the paperwork and do this,"
The “checkout line” is basically the last step before you sign everything and finish the purchase. It’s often when the dealership tries to get you to move forward fast.
The “checkout line” is the final stage of the buying process where you’re close to signing and paying. In practice, it’s when pressure often increases to complete the deal quickly and finalize financing and paperwork.
conflict of interest
"[750.4s] They know all the great banks and all the great rates. [752.7s] That's a conflict of interest, right? [754.4s] The decades of protect that department [756.7s] that is in this world that is only trying to make,"
A conflict of interest means the dealership’s incentives might not line up with what’s best for you. If they make money from certain choices, they may push those choices even if another option could be better.
A conflict of interest in dealership financing means the person or department making recommendations may benefit from steering you toward certain products or lenders. That can affect what you’re offered—like which bank gets chosen or which add-ons are emphasized—rather than purely what’s best for you.
finance office
"[761.1s] Instead of, you know what, with the finance office, [762.3s] hey, we got 50 years back up. [763.8s] They're going to test multiple different banks."
The finance office is the part of the dealership where they finalize your paperwork. It’s also where they arrange the loan and may try to sell extra add-ons that affect your total cost.
In car sales, the finance office (often called F&I) is where the deal is finalized and the paperwork is handled. It’s also where lenders are selected and add-on products like vehicle service contracts and other financing-related items are commonly offered.
negotiate
"But if you believe you're offering a service [783.3s] to somebody, just be honest and negotiate, [785.5s] or tell them you're charging a service."
Here, “negotiate” means you shouldn’t just accept the dealership’s financing terms. You can ask questions and try to get a better interest rate or fewer extra charges.
In this context, “negotiate” refers to pushing back on dealership financing terms—especially the interest rate and any dealer profit embedded in the deal. The host is arguing you should ask for clarity and be willing to bargain rather than accept the first finance offer.
transparent
"The reason why dealerships won't do this [795.2s] is that it would, nobody would pay it, right? [797.4s] If I knew that it was going to cost me one point of markup [800.1s] or just say 500 bucks for me to do my own financing [803.1s] versus going to the bank, I'd just go to the bank, right? [806.4s] But this is the problem with the dealership level. [808.2s] Dealerships don't want to be transparent."
“Transparent” means the dealer clearly explains how they’re making money. The host’s point is that if they don’t explain the financing markup, it’s harder for you to compare offers.
“Transparent” here means clearly disclosing how the dealership makes money in the financing process, such as whether it marks up the lender’s rate. The host claims dealerships avoid this because it can be more profitable when the customer can’t easily see the markup.
disclosure
"they could start, they could start, for example, [816.5s] letting people know with a simple disclosure [818.4s] that I'm marking up your rate in finance."
A “disclosure” is a clear statement about what’s really going on in the deal. In this case, it would mean telling you if the dealer is adding extra profit to your loan rate.
A “disclosure” is an explicit statement that explains key deal details—here, the idea of telling customers that the dealership is marking up the finance rate. The host suggests a simple disclosure could reduce confusion and improve trust.
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