"Asking a car dealer for the real interest rate is like asking a magician how the trick works." -Chase Jordan

How Interest Rates on Car Loans REALLY Work—and How Dealers Make Money Off Yours

💸 Car Financing Isn’t Just a Loan—It’s a Profit Center For Dealerships!

When you finance a car through a dealership, you’re not just getting a loan.

You’re stepping into one of the biggest hidden profit machines on the lot.

While it may seem like they’re doing you a favor by “shopping around” for a rate, the dealership often marks up the rate they get from the bank—and pockets the difference.

That’s called a yield spread premium, or just "reserve."

Let’s break it all down in a simple way.

🔢 What’s a Buy Rate vs. Sell Rate?

• Buy Rate = The rate the lender actually approves for you (e.g., 5.5%)

• Sell Rate = The rate the dealer presents to you (e.g., 7.0%)

That 1.5% difference?

It doesn’t go to the lender—it goes straight into the dealership’s bank account.

Over the life of a loan, that can add up to hundreds or thousands of dollars.

💡 Example:

Let’s say:

• You’re financing $30,000

• Loan term is 72 months

• Buy rate is 5.5%

• Dealer marks it up to 7.0%

Over the loan term, you’re paying an extra $1,500–$2,000—just because the dealer added margin to your interest rate.

And here’s the kicker: they are not required to tell you the buy rate unless you ask. Most people never do.

🧠 Why This Happens

Dealership finance offices (a.k.a. the F&I department) are not just there to finalize paperwork.

They’re salespeople with quotas—and a huge chunk of their income comes from:

• Interest rate markup (reserve)

• Add-on products (warranties, GAP, etc.)

The more you finance and the higher your rate, the more they make. So guess what happens?

• They stretch loan terms (72–84 months)

• They push for low monthly payments (hiding high rates)

• They downplay your right to use outside financing

✅ How to Protect Yourself

Here’s how to keep your rate—and wallet—safe:

1. Always Shop for Financing First

• Get pre-approved at your bank or credit union

• Know what rate you qualify for before walking into a dealership

2. Ask for the Buy Rate

• Use this phrase: “What rate did the bank approve me for?”

• Insist on seeing the approval sheet if they’re hesitant

3. Use the Pre-Approval as Leverage

• If the dealer can beat it—great.

• If not, stick with your lender.

• Don’t be pressured into “convenience” financing.

4. Don’t Focus Solely on Monthly Payments

• A low monthly payment can hide a bad interest rate and a long loan term

• Always ask for APR and total cost of financing

5. Know That 0% Isn’t Always the Best Deal

• Sometimes, you can choose between 0% financing OR a cash rebate

• Run the math: the rebate might save you more than 0% financing would

• Triple check, what is the car costing you TOTAL with rebates and interest and with 0% and no rebate

• Sometimes one is cheaper so do the math they never thought you in school to do

🛡️ How Deal Guard Helps

At Deal Guard, we:

• Review the financing terms before anything is signed

• Break down the APR, buy rate, and fees line-by-line

• Help you decide whether to use the dealer’s loan or your own

• Shield you from inflated rates or sneaky long-term loans

We speak finance fluently so you don’t have to.

👉 Let Deal Guard protect your car loan deal

⚡ Final Takeaway

Financing can be a trap—or a tool. It all depends on what you know.

Don’t walk into a dealership unarmed. Know your numbers, ask the right questions, or bring Deal Guard along for the ride.

👋 From Chase:

🚗 You wouldn’t let a stranger manage your retirement account—so why let a dealership dictate your loan?

At Deal Guard, we break down every financing offer so you never get played by padded interest rates or payment traps.

Smart, confident car buying starts with knowledge—and ends with the best deal possible.

Visit GETDEALGUARD.COM to get started, or swing by FUNNEWCAR.COM for a laugh and some car buying wisdom.

See you there,
Chase Jordan