Padded numbers. Best game for a salesman. I made more money on splitting (charge higher APR and sell to bank for lower APR) and padding then I did on the actual car. My pennance is explaining how it works.
You said total prices is $18K even (thats everything right, tax title, tags, processing fee). The "out the door price". If you were paying cash you could hand of $18K and walk away.
You said you put $5K down so thats $13K financed.
$13K financed @ 2.9% for 60 months = $233. You were quoted $266. It's called packing. They packed $33 per month into the loan or $1584 over life of the loan. You aren't paying $18K for car you are paying $19584. How can they get away with it if the purchase order says $18K on the dot? They get you to buy something else for reallly good deal.
How? So when you go the finance office and they can sell you rustproofing, undercoating, fabric protector, service contract, extended warranty, gap insurance, etc. Everything in finance office is ripoff. Let me say it one more time EVERYTHING in finance office is rip-off. Even if you wanted extended warranty or GAP insurance you could buy it anywhere else for half the price. You likely can buy GAP insurance from the mob for less of a ripoff than what it is sold at dealerships. Markup in finance office is usually 100%-300%. Now most consumers have general idea that finance office bad deal so they use packing to hide it.
Here is an example:
Finance guy explains some service contract for oil changes, tires, discounts etc. You go "no way" (smart move) then the finance guy goes "what if I can get you a service contract for $299? Hell new tires alone on this car are $300". You wife remembers paying $349.86 for tires at Sears last year so your wife goes "Honey it sounds like good deal". You know in your gut it is a bad deal but for $300 it sounds like a good deal. So you say yes. Bingo you just bought a service contract for $1584+$300=$1884. You don't notice it because your monhly payment "only" goes up $5.40 to $271. Remember you thought your monthly payment was $266 so it going to $271 looks like only $300 was added to the cost. When in actuality it went up from $233 to $271 which is $38 or $1884 added to price. Dealer laughs all the way to the bank as they pocket $1884 on a service contract worth maybe $500 (more like $200 because they tend to have massive restrictions on anything other than oil changes). $1300 profit and salesman gets 25%. Dealership could sell car at loss and still take you to the cleaners.
Here is the simple math.
At 2.9% for 60 months loan should cost you $17.924 per $1000 financed. For any other numbers use loan calculator at bankrate.com and put in loan amount of $1000. One you have your price per $1000 you can determne anypayment for any price. So if you finance $13,000 it would be $17.924 * $13,000 / $1,000 = $233.01. Any other number and you are getting "packed". Of course you need to look at the final number. Total price including EVERYTHING (including trade in and paying off negative equity on old car) minus downpayment.
