Oct 17 2008
Were you told that the dealership’s rates came “straight from the bank” or were “standard bank rates”?
Most dealerships that arrange financing do not provide the credit themselves. These dealerships assign the contract to a finance company, and receive a markup (often called a “dealer reserve”) if the interest rate on the contract is above the bank’s “buy rate.” What customers don’t often realize, however, is that the interest rate quote they receive is discretionary. Dealerships can, and often do, quote interest rates significantly higher than the bank’s “buy rate.” The markup is their profit.
Some dealerships, however, take advantage of customers by misrepresenting (or implying) that the interest rates they quote come directly from the bank and are non-negotiable. This is misleading because dealerships generally have discretion to quote any interest rate up to 3 percentage points above the bank’s “buy rate.”
The lesson for consumers is that financing rates are always negotiable. Dealerships that imply their hands are tied on a particular financing rate are probably not being honest with you.
