I’m looking to understand whether car dealerships have the ability to mark up the interest rates on auto loans provided by lenders. Specifically, I want to know if this is a typical practice and how it might affect the overall cost of financing a vehicle.
Dealerships frequently have built-in dealer reserve percentages allowing them to mark up the rates offered by lenders. It’s a standard practice to secure a profit margin on every financing deal, so while the base rate comes from the lender, the final APR you see isn’t always the lowest available. My observation from the field is that while some dealers keep the markup minimal to stay competitive, others might push it higher, especially if you haven’t shopped around. Always check rates directly with your bank or credit union and compare them with the dealer’s offer. Informed buyers will know this isn’t a secret penalty—it’s simply another cost factor that can be negotiated if you’re prepared.
I’ve been following these trends for a while, and it does seem that many dealerships take advantage of mark-ups when it comes to auto loans. Essentially, when dealers are working with lenders, they often have some wiggle room to add on extra points to the interest rate. This isn’t necessarily a nefarious tactic—it’s a way for them to boost their profitability on financing deals. Of course, it means you might end up paying a higher rate than what you’d see if you shopped directly with a bank or credit union.
Market trends have shown that with rising interest rates and tighter lending regulations, some dealerships are packing even more of their margins into these loans. It might be a bit of a double-edged sword; on one hand, it provides a convenient way to finance your vehicle right at the dealership, but on the other, it could raise your financing costs. Doing a bit of comparison shopping might help in ensuring you’re not overpaying, especially now that lender strategies are in flux. 
I’ve looked into this a bit and my experience lines up with what others have mentioned—dealerships do sometimes add extra points on the auto loan interest. It’s pretty much like they’re getting a little commission for setting up the loan, so they have an incentive to mark things up instead of just handing you the best rate directly from the lender. That said, it’s not always over the top; it often depends on the dealership, and sometimes the mark-up might be modest. But if you’re comfortable shopping around, it might pay off to see what kind of rates you can get directly from banks or credit unions. Just be aware that the convenience of in-house financing might come with a slightly higher overall cost. It really depends on how much you value that convenience versus potentially lower rates elsewhere.