A Car Salesman’s Worst Nighmare

Posted on 26. Sep, 2005 by in Credit & Debt, Humor

I bet you thought car salesmen didn’t have nightmares – didn’t you? Well, you’re wrong. And you might be surprised that the culprit is in millions of backpacks across the country. That’s right – a car salesman’s worst nightmare is a good ‘ol financial calculator.

It looks innocent enough – a few more buttons than the normal run-of-the-mill gradeschool variety, but who really knows what those “PMT,” “I/YR,” and “FV” buttons do anyway? Well, if you happen to be buying a car anytime soon – those buttons could end up saving you thousands in the long run, which is not a bad return on a $19.95 investment. Let’s explore why.

The basic concept behind the nightmare which is the financial calculator is actually quite simple – time. The time value of money, to be more specific. If you think about it, you already know quite a bit about this concept already. For example, would you rather have $1 today, or $1 at the end of the month? The correct answer of course, is the $1 now. But why? This is the time value of money at work.

You see, the concept of the time value of money simply means that as time passes, money becomes more valuable. This is why we invest money in bonds or park our money in a savings account. Interest accumulates over time so that our investment becomes more valuable in the future. So if we took the $1 today we would be able to invest it, or stick it in a regular ‘ol savings account and at the end of the month we might have $2. So by curbing our desire for that new iPod Nano today, we will end up with more money at the end of the month. Using this knowledge, you can now scare the pants of your car dealer and save a ton of money doing it.

The problem is that car dealers like to think that their unsuspecting customers do not understand this concept of the time value of money. But luckily you now know. The dealer will try and tell you that you can drive away today by promising to make payments of $249 a month with a 5.9% interest rate on a $14,000 car. Well, is that a good deal or not? Time to whip out the nightmare…

There are only 5 buttons that will help you out in such a situation and they are usually located in a group together – at the top of the calculator for example. They are:

* N (Number of Periods) –
* I/YR (Interest Rate per Period) –
* PV (Present Value) –
* PMT (Payment Amount) –
* FV (Future Value) –

By filling in each of these “variables” you can solve for the one you want to know. It’s just a “plug-and-chug” type of thing. So let’s figure out what the interest rate really is in our above situation.

N – Blank (this is what we’re solving for)
I/YR – .49167 (because N and I/YR have to both be in months and 5.9/12 = .49167)
PV – 14,000 (price of car today)
PMT – $-249 (monthly payments out)
FV – $0 (the amount we’ll owe at the end of 36 months)

If we type in each of these numbers, then the corresponding button on the calculator (.49167, I/YR, 14000, PV, 249, PMT, 0, FV) and then press “N” we get (drumroll please). . .

66! That means that in order to pay off this car you will need to pay $249 for almost 5 1/2 years. Now, if you don’t mind paying for your car for 5 1/2 years, then this might be a good deal for you. But the important thing is that now you can confirm (and mostly debunk) what the car salesman is telling you.

I’ve had many friends try this “technique” and bring their financial calculators with them to purchase their car. Some have encountered ridicule for bringing it but that’s only because as I said earlier, the calculator is the car salesman’s worst nightmare. However, almost 99% of the time the car dealer will have to go back and “recompute” something after you tell them that, “With that kind of payment for 36 months I would be paying 12% interest! But you only told me 6%!”

Remember, just because the car salesman sits behind a nice fancy desk and is surrounded my nice shiny cars does not mean he knows anything about money or financing! Let the nightmares begin!

8 Responses to “A Car Salesman’s Worst Nighmare”

  1. Mr WordPress

    26. Sep, 2005

    Hi, this is a comment.
    To delete a comment, just log in, and view the posts’ comments, there you will have the option to edit or delete them.

  2. steve

    15. Jul, 2006

    According to my Texas Instrament BAII PLUS calculator I came up 55.60 payments. What did I do wrong?

  3. steve

    15. Jul, 2006


  4. bruce

    16. Sep, 2006

    Answer from Steve is why we don’t like customers bringing in their own calculators! Most customers that rush out to buy their TI financial calculators,can’t figure out how to use them,even with the instructions provided, as above!. This is why the calculator is a car salesman’s worst nightmare!

    Regareds, A car salesman

  5. Don Lapre is a Superstar

    12. Dec, 2006

    Yes this would be the car salesman’s greatest nightmare if people can figure out how to use it. I am willing to bet that anyone who knows how to use this will not be a dupe in the first place. This is great device but I don’t think it will make a difference when it come to car sales.

    Don Lapre is a Superstar

  6. Rob

    29. Mar, 2008

    Yikes…came across this and had to laugh. I could care less if a guy comes in to buy a car with a calculator or not…does not make a difference. We sell them on a car, and a price on the car. The financing area is handle by the F&I director. I could care less if your payment is $200 or $300….that is your choice. All I can do is set the price for you, and for you to accept it or not. Bring your calculator, bring your banker….heck bring your cell phone network…just be ready to pick out a car you liek.

  7. danny

    10. Apr, 2008

    I’m a car sales man for 6 years and I don’t mind a customer bringing a financial calculator at all. I assume my customers know everything (intrest rates, invocie price etc) so if I go in with that mindset, not only do I sell more cars, I have legions of happy customers who know they didn’t get screwed over by some shady car salesman. My mentor in the business taught me “if you have to be dishonest to sell cars, your’e a weak salesman” I have no worries and sleep like a baby.


  1. Auto Dealers Compete » Blog Archive » Car Salesman’s Worst Nighmare - July 28, 2006

    […] BeancounterBlog.com » Blog Archive » A Car Salesman’s Worst Nighmare […]

Leave a Reply