Car Dealer Finance Profits
How They Profit
& How To Avoid It!
Car dealer finance profits can be HUGE if you let the dealer arrange auto loans for you. In turn this profit leads to inflated monthly car payments for you, the consumer.
It all begins with the auto lenders trying to "entice" the car dealers to send them business in the way of auto loans.
Prime and non-prime auto lenders will normally allow dealerships to mark up your approved finance rate (also called the buy rate) by as much as 2.5%.
They in turn "sell" you this finance rate at the inflated price so to speak.
Let me show you an example:
If you were financing $30,000 for your new car and the dealership were able to get an approval for your auto loan at 5.5% for 72 months, then the dealership would have the ability (if you let them) to sell that finance rate to you for as much as 8%.
In this example,
that 2.5% mark up would translate to:
- $2,624 in profit.
- $36 added on to your monthly payment.
That $2,624 is normally split between the dealer and the lender, usually on a 75/25 or 70/30 ratio.
Assuming the 70/30 split (most common), then the dealer has made out like a bandit and profited an additional $1,836 just for submitting your loan and arranging your financing.Trust me when I say...
It's not $1,836 difficult to get any loan approved!
Good for the dealer, but bad for you...You're stuck over paying $36 each and every month over the course of your loan.
If that doesn't get you motivated to get your own financing, then I don't know what will! Arranging your own financing is the best way to avoid this mark up and it's easy to do.
Where to get approved
I highly recommend My Auto Loan as they work with a multitude of lenders that will compete for your business. In fact, you'll receive up to four competing quotes by completing one simple application.
Some of their lenders are advertising rates as low as 2.49% (as of this writing). Check today's low rates here -> ""Auto Finance"" and apply online...It's Easy!
You can also use your approval to make the car dealer finance department compete to earn your business. If they can beat the rate (unlikely)...Great! Go with theirs. It's easy to save if you go prepared.
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