Dealership Pricing Theater vs. Real Finance Math

Walk into a dealership and you'll see "SALE" signs everywhere. "$5,000 off MSRP!" "Zero percent financing!" "Best deal of the year!"

Here's the thing: the sticker price is just the opening act. The real cost of ownership happens in the financing office, and that's where the theater begins.

Fake Discounts

Dealers will mark up a car's price, then "discount" it back to market value. You think you're getting a deal, but you're paying what everyone else pays. The discount is fake.

Or they'll advertise a low price, but that price excludes destination fees, documentation fees, dealer prep charges, and other add-ons that get tacked on at the end. By the time you're done, you're paying more than you thought.

Marked-Up Rates

Here's one that catches people: dealers get approved at one rate from the bank, then mark it up and present it to you as if that's the best rate available. They call it a "win" when the bank approves you, but you're actually paying a higher rate than you qualify for.

The difference between the buy rate (what the bank approved) and the sell rate (what you're offered) is called "dealer reserve." It's profit for the dealer, and it costs you money in interest over the life of the loan.

Add-Ons That Don't Help

Extended warranties, gap insurance, paint protection, fabric protection—dealers push these hard because they're high-margin products. Some are valuable. Most aren't.

The problem: dealers often finance these add-ons into your loan at inflated prices. You're paying interest on products that don't improve your ownership outcome. That's money that could be going toward building equity instead.

What Actually Determines Cost of Ownership

The real cost of ownership isn't the sticker price. It's:

• The interest rate you actually pay (not the one advertised)
• The loan term and how it affects your equity position
• The residual value (for leases) and whether it's realistic
• The money factor (for leases) and how it compares to market rates
• Fees and add-ons that get rolled into financing
• Your equity position over time (can you exit the deal early?)

The Real Math

Two people can buy the same car at the same "sale price" and have completely different ownership costs:

Person A gets a 72-month loan at 8.5% with $2,500 in add-ons rolled in. Their monthly payment is $450.

Person B gets a 48-month loan at 6.2% with no add-ons. Their monthly payment is $520.

Person A's payment looks lower, but they'll pay $4,200 more in interest over the life of the loan. They'll also be underwater longer, limiting their options.

The reality: The "sale price" is the same, but the ownership cost is completely different. That's the math that matters.

Bottom Line

Pricing theater is everywhere. Fake discounts, marked-up rates, unnecessary add-ons—they're all designed to make you feel like you're getting a deal while maximizing profit for the dealer. I don't play that game. I focus on the numbers that actually determine cost of ownership: interest rates, loan structure, equity position, and real financing math. That's how you get a deal that works—not just one that looks good in the showroom.