Definition of backend costs and its importance in finance

Backend refers to all of the extra costs that an auto dealer might try to add on to the cost of a car when figuring the financing. The backend cost is where much of the profit on selling a car is made for the dealer.

Examples of backend costs are insurance, extended warranties, special financing costs, VIN etching, vehicle history, and detailing. Some of these things are good to have, especially when purchasing a new vehicle. Car buyers should go into the financing process with a clear understanding of the extras they want for their new car. Avoid being persuaded by convincing sales talk. If you do not want VIN etching, then do not get it, no matter how convincing the sales speech is. Remember, it is the car salesman's job to tack on as many extras as he or she can to the cost of the car. Keep your backend cost where you want it!

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