Free preview · from the dealership side of the desk
When a dealer arranges your loan, the bank doesn’t hand you a rate directly. It sends the dealer a buy rate, the lowest it will accept for your credit, term and car. Most lenders then let the dealer write your contract at a higher contract rate and pay the dealer part of the extra interest. That’s called dealer reserve. It’s legal, it’s normal, and on most deals nobody mentions it.
From the finance side, reserve is one of the most reliable profit lines in the building. A two-point markup on a $35,000, 72-month loan costs you nearly $2,500 over the loan, yet the payment moves only about $34 a month, which is why it’s so easy to sell. It’s also one of the easiest costs to remove. Below: how the money flows, why dealers do it and when it’s fair, why a pre-approval is the whole game, special cases, and how to ask about it without starting a fight.
Members read the rest · 8 more sections
In the full guide
- How the money actually flows
- What the markup costs you
- Why dealers do it (and when it is fair)
- The pre-approval is the whole game
- Special cases
- How to ask without starting a fight
- Your game plan
- What to say
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