"Every dealership says 'We don't mark up rates'—right before they totally do." - Chase Jordan

What Is Dealer Reserve? How Dealerships Make Extra Profit from Your Car Loan

💰 What Is Dealer Reserve?

When you finance a car through a dealership, you’re not borrowing directly from them—they’re acting as a middleman between you and the lender.

That middleman role comes with a secret profit center called dealer reserve.

Dealer reserve is when a dealership marks up your approved interest rate from the bank and keeps the difference.

It’s one of the F&I (Finance & Insurance) department’s biggest income sources—often more than they make on the car itself.

🔍 How It Works (Real Example)

• You get approved by the lender at 5.00% APR (this is called the buy rate)

• The dealership tells you the rate is 6.75% APR (this is the sell rate)

• The extra 1.75%? That’s profit the dealer keeps, paid out to them by the lender

Depending on the loan amount and term, this could mean $1,000–$2,500 in hidden profit—all baked into your monthly payments.

🧠 Why Does This Happen?

Lenders allow dealers to mark up rates as a way to incentivize them to send business their way.

It’s legal, and it’s common—but rarely disclosed to customers!!!

Even worse?

The finance manager may act like they’re working hard to “get you the best rate.”

In reality, they’re often cherry-picking the rate that makes the dealership the most money.

📊 Impact on Your Loan

Let’s break it down:

Scenario:

• Loan amount: $30,000

• Term: 72 months

• Buy rate: 5.00%

• Dealer markup: 1.75% → Sell rate: 6.75%

Monthly Payment:

• At 5.00% → ~$483/month

• At 6.75% → ~$506/month

That’s a $23/month difference, or $1,656 extra over the life of the loan.

All of it goes to the dealership—not the bank.

🧾 Is Dealer Reserve Legal?

Yes.

But shady?

Often.

Most states don’t require dealers to disclose the buy rate vs. the sell rate.

Some states have limits on how much the rate can be marked up—typically 2.0% max—but enforcement varies widely.

And here’s the real kicker:

You are not required to finance through the dealership.

✅ How to Protect Yourself

1. Always Get Pre-Approved

   • Visit your local credit union or bank before shopping

   • Know your qualified rate and terms

2. Ask Directly for the Buy Rate

   • Use this phrase: “What did the lender approve me at?”

   • Watch for evasive or vague answers

3. Compare Offers on the Spot

   • Bring in your pre-approval

   • Let the dealership try to beat it—just make sure it’s not a marked-up version

4. Use a Loan Calculator

   • Don’t rely on “monthly payment” talk

   • Break down total interest cost

5. Bring Deal Guard

   • We'll analyze every number and tell you what’s real—and what’s padded.

🛡️ What Deal Guard Does

At Deal Guard, we:

• Request the original bank approval and compare it to what the dealer offers

• Catch inflated interest rates and payment manipulation

• Help you choose the best financing route—dealer or not

• Ensure your monthly payment reflects value, not padding

We act like a shield between you and shady finance practices.

👉 Let Deal Guard review your car financing deal

⚡ Final Takeaway

Dealer reserve is one of the oldest tricks in the book—and one of the most profitable for them.

But with the right knowledge and the right partner (like Deal Guard), you can flip the script.

Smart car buying means knowing what’s behind the curtain. And that’s what we do best.

👋 From Chase:

🚗 Most people never ask what their real loan rate is—and dealerships are counting on that.

At Deal Guard, we flip the script. We ask the hard questions, analyze the fine print, and make sure you don’t pay more than you should.

Ready to buy smarter?

Visit GETDEALGUARD.COM to get started, or hang out at FUNNEWCAR.COM for car buying laughs and tips.

Catch you soon,
Chase Jordan