Auto Dealer Markup Calculator
Many car dealers are like loan brokers – they typically write the car loan, then sell the loan to a third party lender. Markups involve kickbacks from the third party loan purchaser (or lender) to the dealer for arranging a loan. Before arriving at an agreement with a customer, a dealer will contact several potential lenders. Purchasers tell the dealer the interest rate at which they are willing to buy the loan, a rate known as the “buy rate." Unfortunately for the car buyer, the purchaser often agrees to allow the dealer to arbitrarily add interest to the buy rate, placing the buyer in a more expensive loan than what they qualify for. The extra profit is either split between the dealer and lender or pocketed entirely by the dealer. Auto dealer loan markups cost Americans more than 20 billion dollars each year.
