What Really Happens in the Finance Office at Car Dealerships (It's Costing You)

Added: 2026-05-28

[00:00:05]Cars, America's favorite product to sell using unsettling television ads like this.

[00:00:18]>> Okay, well that was like a lonely island made Steve Carell vibe. Didn't like any of that. These days cars are more expensive than ever and it's crippling an entire generation of Americans. Take this Florida nursing student for example. In 2023, she bought a Kia K5 GT, a $30,000 car that came with an $830 monthly payment. And after just 3 years, those payments became so overwhelming that she filed bankruptcy at the ripe age of 24. She told the New York Times that her Kia became quote the bane of her existence and was probably quote the worst decision she'd ever made financially. That should really be Kia's new tagline. Kia, the worst decision I've ever made financially. Guessing they're not going to be a sponsor anytime soon. Still hope for Hyundai, though. Should have bought a Hyundai.

[00:01:02]Should have bought Hyundai. But her story isn't even the worst one out there. After all, one in five new car shoppers in 2025 took on a payment of over $1,000. So, how did we get here?

[00:01:12]Well, car prices have gone up drastically since co with the average new car loan now sitting over 43 grand and the average car payment sitting at $748. Tariffs and other economic factors have also hurt the car market. But there's a common thread that isn't a new development, and that is dealerships.

[00:01:28]You know, the most grueling place to spend your day, only second to a time share presentation in the basement of a Holiday Inn. Dealerships account for three out of four car purchases in the US. And that's more than a little scary because when you start looking under the hood car reference, it doesn't take long to see that car dealerships are a giant machine that get you to spend more and take on extra debt by basically forcing you into psychological warfare. or as Trump would put it, a psychological short-term excursion/military operation. So today, let's talk about dealerships, how they work, why they're such a problem, and what we can do about it. Aside from being a breeding ground for guys named Chad, who really enjoy telling you they work in finance, car dealerships are independent autonomous franchises, and they're licensed to sell cars made by companies like Ford, Honda, and yes, even Kia. You see, when you go to buy a car, you're not going to the Toyota store or Nissan.com. You're going to a locallyowned dealership like Daryl Walrip Honda or Daryl Walrip Subaru or Daryl Walrip Buick GMC. Daryl, we get it. If you like cars, man, we get it.

[00:02:30]Your NASCAR days, great run. Now you're making the big bucks selling us the cars, but find another business, a car wash. Oh, dang it. That's cars, too.

[00:02:39]Frick. Frick. Daryl, >> don't ever say that word again.

[00:02:42]>> So, dealerships operate as a middleman between car manufacturers and the consumer, aka you. and their mere existence makes cars way more expensive.

[00:02:50]In fact, a new report estimates that the dealership model adds up to $5,000 to the price of a new car. And it's not hard to see why. Operating a dealership comes with lots of expenses. You got to pay a sales staff. Keep the lights on.

[00:03:02]You got to stock the coffee bar with Nature Valley bars and expired K Cups.

[00:03:06]Jokes on you, the K Cups were already expired cuz they were NEVER FRESH. BOOM.

[00:03:11]KUP ROAST. SAD. Those sad grounds never stood a chance. Were they even ever ground? Like were they ever even beans?

[00:03:18]That's the question.

[00:03:19]>> Today we're going to talk about how to complain in a coffee shop.

[00:03:22]>> Or are they formed as like a like how Pringles are made? You know what I mean?

[00:03:26]Like it's not a real potato. It's just like shards and particles that they just like smash into a chip. Smash. Dude, I could I could punch, dude. I could throw a punch.

[00:03:36]That actually kind of hurt a little bit.

[00:03:37]I don't know if I'm weak or if I'm strong. You know what I mean? Like am I weak cuz that hurt or am I strong because I was able to hurt? We'll never know. I am my own worst enemy. Why do I think of Lit? Is that their song? My own worst enemy.

[00:03:49]>> What?

[00:03:52]>> Lit. My own worst enemy. Does no one watch TRL anymore?

[00:03:55]>> No, not since uh not since co.

[00:03:58]>> Gosh. So, if that's all true, then why don't car manufacturers simply sell directly to consumers? Well, fun fact, they can't. You see, most states have laws requiring car manufacturers to sell their cars through dealerships. And most of these laws were passed decades ago with the goal of keeping manufacturers from undercutting local dealers and putting them out of business. And while some newer companies like Tesla have implemented clever workarounds for these policies, pretty much everyone else is stuck with them. And to be fair, car dealerships aren't inherently slimy and gross, except for those tote note, buy here, pay here lots that give out subprime loans like popcorn balls on Halloween.

[00:04:34]>> Do applicants ever get rejected?

[00:04:40]I don't like it. I don't like it. And I don't want to throw all sales people under the bus here, okay? There's plenty of good apples out there simply trying to keep the lights on at home. But the dealership business model practically forces them to manipulate your psychology. You see, dealers know that your likelihood to pull the trigger on a car purchase comes down to the mood you're in, followed by the actual financial numbers. And they can manipulate both until you leave happy.

[00:05:02]It starts with the visual experience.

[00:05:03]The shiny office building, the strategic lighting, the Chevy spark on the rotating platform like it's starring in a Broadway show. But let's take a look at what these dealerships have turned into.

[00:05:14]Thank you for choosing Grubs Infiniti in Great Fine, Texas. I would love to show you around. I'm going to bring you into our stunning showroom where we showcase the newest and most cutting edge vehicles in our Infiniti inventory.

[00:05:25]While your vehicle is being serviced or you're in the final steps of the buying process, you're welcome to relax or work in our cafe area, kids room, or our private business lounges.

[00:05:35]>> Ooh, a business lounge, a cafe, free Wi-Fi. Is this an Infinity dealership or the allnew LaGuardia Airport, guys? All right, make a decision. An even bigger psychological ploy, the test drive. Now, use wisely. A test drive can help you decide on the make and model that you want. But often those test drives become a gateway drug. Think about it. It's a lot harder to say no to a car you can't afford after you felt those leather heated seats in that 600 horsepower. You know, since we still measure vehicle capability in equestrian terms, and you know how I feel about horses, but get this, a 2024 survey found that three out of four car buyers said the test drive alone sold them on the vehicle they finally purchased. And car dealerships know that, and it's why they're so eager to get you behind the wheel. Another genuine psychological weapon for dealerships is negotiation. With virtually any other consumable product in the world that you purchase, you see a price, decide whether you want it or not, and then you choose how to pay. Car buying not quite as simple. It basically forces you to become an expert negotiator if you want a good deal. And if you want proof of this, look no further than 33-year-old Tommy Mucula.

[00:06:37]After over a decade working for dealerships, he developed what the Wall Street Journal called fluency in car dealer speak and an encyclopedic knowledge of dealer inventory. And now Mucula runs a business negotiating cars on customers behalf which pulls in 200 grand a month between Mucula and the other negotiators he employs. And in his words, quote, "You're hiring a middleman to deal with the middleman to make the middleman more efficient." And I'm sorry, but an industry where you need to hire a second middleman to deal with the OG middleman is insane. Especially since when you negotiate on your own, the torture doesn't end when you land on the price. That's simply the point when you get an exclusive invite to the finance office. and they will sell you everything they can think of and more.

[00:07:18]Extended warranties, leather mats, maintenance subscriptions, paint protection, blinker fluid. If you know, you know, Rachel Cruz, could you replace blinker fluid?

[00:07:28]>> Nope.

[00:07:30]>> And this is why so many buyers turn to these no haggle lots like CarMax and Carvana, companies with non-commission salespeople who simply give you their best price right out of the gate. But you do pay a convenience for that as their best price can range from 5 to 15% higher than what you could get by negotiating at a dealership. But hey, at least you don't have to deal with this guy. I will do anything to not deal with that guy. Dealerships do have one more trick up their sleeves that we haven't gone over yet, and it's the most financially ruinous of all. You know what else is financially ruinous?

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[00:08:31]$25 forever requires customers to remain active on Boost Unlimited plan. And before we get back to how car dealerships take advantage of you, allow me to introduce you to someone who will not. And that is Fairwinds Credit Union, another sponsor of today's video. Unlike the bigname banks, they're not trying to push you into crappy debt products or fee you to death. No, Fairwinds wants you to actually win with money. And that shows up in their customer service and in the quality of products and tools they offer. And may I recommend opening a smart bundle, which comes with a fee free checking account and a high yield savings account with competitive APY.

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[00:09:09]Okay, the next trick dealerships have up their sleeves is debt. If you've been around here for more than 5 seconds, you know that I am against car debt in any form. Since borrowing money to buy a depreciating asset is about the worst thing you can do. It's even worse than borrowing money to go see the Melania movie. And listen, if you're on a payment plan for the Melania movie, straight to jail. Straight to jail. Hot break feels good in a place like this, >> but that's a discussion for another day.

[00:09:34]For now, let's focus on how dealerships use debt as yet another tool to manipulate you. Seeing a car sticker price can take your breath away, like the first time you saw the Grand Canyon or the last time you saw the ad for the OM cheeseburger. You're disgusting if you're like that. You're disgusting. But when all you see is the payment, it's a lot easier to stomach. And that's what dealers want you to focus on. They want to gatekeep that out the door price like the New York Times daily crossword. Have some journalistic integrity, guys. Let me do the crossword. But Wordle's free.

[00:10:01]I don't want a Wordle. I'm a grown man.

[00:10:04]I want a cross word. Guessing words over letters. That's maturity. Back to the matter at hand. What happens if you can't afford the payment? Well, don't worry. The dealerships will bend over backwards to make the payment more affordable for you. Now, will they just lower the price or lower the interest rate? Highly doubtful. Most often, they'll simply increase the length of the loan. And this is exactly why 7-year car loans have become so common.

[00:10:26]Specifically, they represented over 20% of all new auto loans in Q2 of 2025.

[00:10:31]There's a reason they say 84 months instead of 7 years. 7 years of the lifetime. 84 months. Hey, that'll be here no time. The biggest consequence here is underwater car loans. That's when someone owes more than the car is worth. And Edmonds reported that close to a third of trade-ins toward new vehicle purchases at the end of 2025 had negative equity with the average amount owed on underwater tradeins hitting an all-time high of over $7,200.

[00:10:56]Think about this. You owe 20 grand on a car that is only worth 13 grand. And the sad part is too many people roll that negative equity into another loan, drowning them even further, making it even harder to get out. And by the way, dealerships are making the majority of their money through financing and kickbacks, which is why they don't take too kindly to people like me who pay cash for the car, cuz their margins this big. Their financing kickbacks this big.

[00:11:22]So, let's recap here. Car dealerships are expensive middlemen powered by manipulative psychology and highly incentivized to rope you into a payment you can't afford. Which leads to a very important final question. What can we even do about it? because you shouldn't have to get psychologically waterboarded into an $800 monthly payment just to buy a car these days. So, let's start with the big picture solution because it would help if we got rid of laws that require the dealership model in the first place. Take it from the International Center for Law and Economics. States should not mandate a single distribution architecture when multiple models can compete to serve consumers. Removing the quote middleman tax would lower costs, expand consumer choice, and better align the law with the modern automobile market. Couldn't have said it better myself, but I did say it's simpler to be fair. That's what a lack of a law degree will do. Now, will that happen anytime soon? Probably not since it affects so many political interests. Lobbyists do be lobbying. So, in the meantime, you need to get educated. If this is the system we're stuck with, you got to learn how to navigate it and avoid the pitfalls.

[00:12:20]Study how car negotiation works. Focus on the out the-do price. Be willing to walk away. Do your research. And most importantly, avoid debt altogether.

[00:12:28]Financing is the bread and butter of dealerships. And taking that bread and butter off the table leaves them without bread and butter and they don't like that. We love our bread and butter. It's America. When you decide to stay within your budget and buy a car you can actually afford in cash, you don't have to worry about getting swindled or falling into their mind games. And when you buy used, you avoid taking the biggest hit on depreciation, which is that first few years of that new car's life. Now, will the dealership try to make your life more difficult if they find out you're buying used and you're not going to finance? Potentially. But in that case, have some walk away power and don't do business with slimy salespeople who try to jack up the price last minute because they find out they're not getting a financing kickback. And plus, when you pay cash, you don't have to deal with monthly payments, interest, or the potential of going upside down on a loan. So, if you learned something, you enjoyed something, hit the like button, hit the subscribe button so we can keep the party going with more episodes like this, like this one, in fact, where I go even deeper into why car loans are America's biggest wealth killer. Click here to watch it next or use the link in the description. Thanks for watching.

[00:13:27]We'll see you next time.