Why Are You here?

Because you want a great deal on your next car, right? Well, here’s some good news: you’re already on your way.

By coming to this workshop, you’ve demonstrated one very important car-buying skill: the commitment to making an informed buying decision.

Our Goal

The purpose of this Web site is to teach you:

Where and how dealers make their profits—so you can decide if you’re getting a fair price.
To avoid common financing pitfalls and find out why it pays to shop for financing.

Car Dealers

The car dealer is not your enemy. The car dealer is not necessarily your ally, either. the car dealer is a business person whose job it is to sell cars for profit—and there’s nothing wrong with that. But how much profit is enough? That’s for you to decide.

You—not the dealer—are responsible for making sure a car deal is fair. We’ll give you the skills to help you make that decision with confidence.

Car Talk

Just for fun we added some car sales lingo to this Web site. Look to the top of each page for definitions of common car sales terms. Knowing these terms probably won’t get you a better deal, but who knows? If you overhear the salesperson calling your deal “a slam dunk,” (see top of Additional Dealer Profit) you might think twice before signing on the dotted line.

Dealer Profit Center

Where and how dealers make their profits—from ADP to F&I (explained later), a look at the way a dealer can make money from a car sale.

Additional Dealer Profit, or ADP, is a tactic used by many dealers to start negotiations at a higher price—so they can offer you a “discount” without losing any profit. Dealers will try to negotiate down from the ADP. You, on the other hand, want to negotiate up from the dealer cost.

Ingnore the ADP

So what do you do about the ADP? Ignore it. You are not obligated to pay this price nor—most likely— should you if you expect to get the best deal possible.

When used, the ADP is usually posted next to the MSRP sticker on the car.

Manufacturer’s Suggested Retail Price (MSRP), or Sticker Price, is the “suggested” price of the vehicle and includes additional information about the vehicle such as accessories. You’ll find this sticker posted on the window of the car at the dealership.

MSPR is a suggested price only and has usually been marked up with dealer installed options.

As with ADP, you probably won’t want to pay the MSRP and you definitely want to know dealer cost before committing to a price.

MSRP is a suggested selling price. You are not obligated to pay it.

Invoice is the “cost” of the vehicle to the dealer. It has the same information as the MSRP plus additional information like holdbacks. Use the invoice to compare what the dealer paid to the MSPR. Don’t expect to obtain an invoice at the dealership. Get a printout of MSRP and dealer cost from your credit union or through Auto Solution before you go.

Holdback is money paid to the dealer by the manufacturer when a car is sold. Many domestic manufacturers use 3% of the sticker price as holdback.

Thanks to holdback, a dealer can make a profit even is he or she sells a car at cost. For example, if you buy a vehicle with a $20,000 sticker price, no matter what you actually pay, the dealer may still receive 3% or $600 in holdback. This is true even if you pay dealer invoice.

Holdback information for all major makes and models is available at your credit union, through Auto Solution, and through sites such as

Incentives are rebates offered on vehicles that the manufacturer wants to move. There are two types of incentives:

Factory to Customer Incentives are cash rebates paid to the buyer of the vehicle. They are usually advertised nationally on TV and dealers must inform you of them.

Factory to Dealer Incentives are rebates paid to the dealer upon sale of the car. They are not included in the dealer invoice, nor is the dealer required to tell you about them.

Incentives change often and it is imperative to know what incentives are available before you purchase. Auto Solution faxes partner credit unions a current incentive list weekly.

Used car values are extremely subjective. One person’s treasure is another person’s junk. Value varies with condition, regional popularity, and availability. Naturally, you’ll want to know your trade-in’s worth before you sell. Reference guides like Kelley Blue Book, the National Automobile Dealers Association (NADA) Official Used Car Guide, and similar cars in the classifieds are a good place to start.

Pricing guides offer a wholesale value and retail value, but remember that these are only approximate figures and your car’s value will vary according to quality. Nice, clean cars bring a premium. High mileage cars may bring even less than the normal book deduction. Accessories increase the value of your trade. Cars with power windows, air conditioning, CD players, etc., are more easily sold and therefore bring a higher price than “bare-bones” models.

Accessories can be good products but they cost money—just don’t pay too much. You could get them for a ride. Consider the following invoice from an actual car sale.

F&I (Dealer Finance and Insurance) is the car dealer’s area of highest profit.

The dealer wants to sell you “F”—their financing. Why? Well, let’s say the dealer’s buy rate* is 8% and they convince you to pay 11% interest on your auto loan. Who gets the 3% difference? Not you!

And if you buy their financing, they can sell you “I”—credit life, accident and health insurance—again at a considerable profit. And while they’re at it, how about extended service contracts, undercoating, an alarm system, etc., etc., etc.

It is not uncommon for the “business manager” (F&I salesperson) to be the highest paid salesperson at the dealership. Why? Because it is not uncommon for the F&I department to be the most profitable department at the dealership.

BEWARE! You shop for your car. Take the time to shop for your financing, insurance, and warranty as well.

*Buy Rate–the lowest rate the dealer can finance a vehicle for a credit-worthy customer.

Like F&I, extended warranties may or may not be just what you need. Before you buy, know the cost. Check with your credit union or call Auto Solution. When shopping for a car, take the time to shop for financing and warranties, too. You could save, or as the following example demonstrates, lose a lot!

Leasing is great…for the dealer! A lease may seem like an attractive option, but be careful! You may get more car at a lower monthly payment, but when you add it all up you will usually find leasing to be more expensive—much more expensive.

Leasing Lingo

Leasing even has its own language:

  • Cap Cost—cost of the vehicle
  • Cap Reduction—down payment
  • Residual—balance owed when the lease is through

The Real Story

Here’s the real story on leasing. You put up a down payment, you pay the monthly payment, you own the car—right? Wrong. Not with a lease.

Instead, after your payments are over you still owe a residual. Even after two, three, or four years of payments, can you still owe a significant balance? Yes!

And watch out if you want to get out of your lease early. It could be expensive. Early pay often comes with a high price.

Final Word on Leases

Some experts suggest that you should check with your CPA or financial counselor before leasing. And never sign a lease (or any other document) unless you full understand exactly what you are signing.


The ins and outs of financing—why it pays to shop around, why the “lowest” rate isn’t always the best deal, why preapproval is a good idea, and why leasing isn’t for everyone.

Before you visit the showrooms, call your credit union or go in and meet with a loan officer. You’ll find out what payments you can afford based on your income/expense ratio. Use the example below with your numbers to see how you prequalify.

With a preapproved loan you’ll know how much you can afford and be in a better position to negotiate the purchase price of the car and trade-in.

Upon approval of your loan, ask your loan officer for a preapproval certificate which shows that your credit union is prepared to advance funds to you.

After you agree on a price, let the seller know that your financing has been arranged through your credit union. Sign a purchase agreement, ask the seller to fax us a copy. (Also ask your insurance company to fax us a copy of an insurance binder showing your credit union as the “loss payee.”) Then call the loan department of your credit union and arrange a time to sign your loan papers…that’s it!

Ten minutes of preparation can save you five years of perspiration (to say nothing of thousands of dollars).

Is the manufacturer’s “low” interest rate really the best bargain? Compare interest rates on the following chart to see.

With credit union financing you save $131.00 on the total price of the car…plus your monthly payment is less than half!

  1. 10 minutes of preparation will prevent years of perspiration
  2. Know dealer cost before shopping
  3. Know about ALL rebates, customer and dealer
  4. Know a fair value for your trade
  5. Finance with your credit union or know the REAL COST of other financing; or
  6. Call Auto Solution …………………………………….

Call Auto Solution or your credit union for all the information you need to get a great deal on your next car:

  • Dealer Invoices
  • Holdbacks
  • PC Carbook
  • Official Used Car Guides
  • Helpful car-buying brouchures

AUTO SOLUTION is dedicated to serving credit union members of the Northwest with their auto buying needs. Visit our Web site for more information and for a list of partner credit unions.