Car Dealer Terms (and What they Mean)

There are few things more intimidating than walking into a car dealership feeling unprepared. In order to protect yourself from spending way more money than you really should be, it’s important to educate yourself. We’ve put a list together of some of the most common selling tactics and turns of phrase used by car dealers in order to make a sale so you can know what to expect before you even step onto the lot.

A ‘Be Back’ Customer:

This is a customer who comes in but doesn’t actually buy anything, saying they want to think about and will be back later to make the sale. Dealers work on commission and will do almost anything to make the sale on the same day. If you’re not committed to buying something right away, don’t let them pressure or intimidate you into making a purchase. You’re the one who has to live with your decision (and who has to make the monthly payments) so if you need more time, take more time.

Dealer Reserve:

Also known as a dealer mark up. When you get a loan directly through the dealership, dealers are actually the ones who set the interest rate you pay, not the bank. The dealer can choose to boost the interest (or ‘buy’) rate above what it actually should be and then gets to keep the difference as extra profit. Dealers can justify this because they are doing the work of arranging the loans and deserve compensation.

Dealer Prep Charges and Doc Fees:

These are fees tacked onto the cost of your auto loan to cover A) dealership personnel needing to prepare vehicles for sale when they arrive at the dealership from the factory and B) covering any costs the car dealer incurred in relation to processing lease or purchase paperwork. Dealer Prep Charges and Doc Fees aren’t always inherently unreasonable, but sometimes they can be considerably higher than they should be. Prepare to negotiate either of these fees if you feel the dealer cannot justify the cost.

Packing the Sale/Payment Packing:

Just as the name implies, payment packing occurs when the dealer throws in a bunch of unnecessary extras into the contract in order to charge you more. Most of the time, these ‘extras’ have little to no value to the customer (‘rust-proofing, for example, is no longer necessary for new cars but is used to pack the sale.) Two other common add-ons are ‘Etch’ (a theft guard that’s supposed to reduce the chance of your vehicle being stolen but offers little benefit to the customer) and ‘Credit Life Insurance’ (which is actually made redundant by most homeowners insurance). Dealers offer these soft add-ons to pack the sale and justify substantially raising the price without adding any true value to your car.

The Five Finger Close or Five Finger Hold:

Put simply, both of these terms refer to car dealers who increase the cost of the car above what was discussed and agreed upon with the consumer but who literally hide or cover the new number with their hand when getting customers to sign. Once their name is on the contract, customers are bound to pay the fee printed there (even though it’s not what was orally discussed). This is why you should always make sure to read over every contract before you sign (and never trust a car dealer who brushes off your request).

Prepayment Penalties:

A prepayment penalty is a clause built into some loans essentially saying that the borrower is not allowed to pay it off early or make large bulk payments at once to lessen the duration and length of the loan. If they do, they’ll be hit with a prepayment penalty and end up owing even more. This isn’t usually a problem for people with prime loans and a good credit score as they are in a better position to negotiate the terms of their loan, but subprime borrowers are often also required to agree to higher interest rates and prepayment penalties so that the dealership and the bank can reap as much money out of the loan as possible.

Spread or Bump:

Spread or Bump is the dealer mark up on the manufacturer’s sticker price on the car you’re looking to buy. It’s incredibly important to do your research before coming in because most dealers don’t disclose the manufacturer’s price. You need to know how much the vehicle is actually worth vs how much the dealer is trying to squeeze out of you so you can make an informed decision (and negotiate).


This is a category you absolutely want to avoid falling into. A lay-down is a customer who does not even attempt to negotiate or question the dealer; they simply say yes to everything the dealer offers (from soft add-ons to price bumps). They’re an easy target for dealers because they present the effortless opportunity to keep adding to the cost of the car (as the customer just ‘lays down’ and takes it).