What “Buy rate” means
When you finance at the dealership, the dealer sends your application to one or more lenders. Each lender replies with an approval and a buy rate: the rate it will accept for your credit profile, term and car. That is the lender’s price.
The rate written on your contract is the contract rate. Many lenders allow the dealer to set it higher than the buy rate, up to a limit, and pay the dealer part of the extra interest. That payment is called dealer reserve.
How it shows up at the dealership
You won’t see the buy rate. You’ll hear “the bank came back at 8%,” which may be the buy rate or a marked-up rate. The cleanest test is having your own pre-approval: if the dealer can beat it, you win either way.
Worked example · illustrative numbers, not a quote
A 2-point markup on $30,000 over 72 months
| Buy rate 6.0% | $497/mo · $5,797 interest |
| Contract rate 8.0% | $526/mo · $7,872 interest |
| Extra you pay | $29/mo · about $2,075 |
Lenders set the markup limits; they are commonly capped at roughly 2 to 2.5 points, sometimes less on longer terms.
What to do
- Arrive with a credit union or bank pre-approval.
- Ask directly: “Is this the buy rate?” and “What is the lowest rate the lender approved?”
- If a rate looks high for your credit tier, finance elsewhere or refinance soon after.
What to say
“I have a pre-approval at 6.2%. I’m happy to finance with you if the contract rate beats that. If the lender approved me lower, I’d like that rate.”
Also called: base rate, lender buy rate.