Do car dealers mark up interest rates on loans?

Do car dealers mark up interest rates on loans?

Yes, often! Dealers usually add a markup—called a “dealer reserve”—on top of the lender’s approved rate.

For example: Bank approves you at 5%, dealer offers 6%, and keeps that 1% difference as profit.

Studies show about 78% of dealer-arranged loans have markups averaging 1.1% above the lender’s rate.

Pro tip: Always negotiate your rate and let the dealer know if you have a better offer elsewhere!