HOW CAR DEALERS MAKE
MONEY CHARGING YOU A
HIGHER INTEREST RATE

A CAR DEALERSHIP HAS A
BANKING LICENSE THAT ALLOWS
THEM TO EXECUTE FINANCE AND
LEASE CONTRACTS.

THESE CONTRACTS ARE WRITTEN
BY THE CAR DEALERSHIP AND
ARE ASSIGNED TO THE BANKS
AND LEASING COMPANIES AS THE
SUCCESSORS OF THE LOANS.

THE CAR DEALERSHIPS ARE
SELLING THE LOANS TO THE
BANKS AND LEASE COMPANIES.
THEY CAN MARK UP THE INTEREST
RATE AND RECEIVE A RESERVE
(PROFIT) PAID DIRECTLY TO
THE DEALERSHIP FROM THE
BANK OR LEASING COMPANY
BUYING THE LOAN.

CAR DEALERSHIPS CAN MARK UP
FINANCE LOANS OR LEASES
250 BASIS POINTS
(2 ½ POINTS ON THE APR)
FOR TERMS UP TO 60 MONTHS
AND
200 BASIS POINTS
(2 POINTS ON THE APR)
FOR TERMS
GREATER THAN 60 MONTHS.

THE DEALERSHIP MAKES THE
PROFIT BETWEEN THE COST AND
SALE OF THE MONEY.

MEANING

IF THE BUY RATE IS 4.99%
FROM THE BANK AND THE
DEALERSHIP CHARGES YOU 7.49%
 ON YOUR AUTOMOBILE LOAN,
THE DEALERSHIP MAKES
A PROFIT OF 250 BASIS POINTS
FOR 60 MONTHS. IF YOU ARE
FINANCING $40,000 THAT
EQUALS A PROFIT
FOR THE DEALERSHIP
OF $3,500.00

THIS IS THE MAIN REASON
WHY PEOPLE ARE CHARGED
HIGHER INTEREST RATES IN
THE FINANCE DEPARTMENTS OF
ALMOST ALL DEALERSHIPS
NATIONWIDE.

UNFORTUNATELY, MANY FINANCE
MANAGERS LIE TO CUSTOMERS
TELLING THEM THEIR CREDIT
HAS SOME DEROGATORY ITEMS
WHICH RESULTS IN A HIGHER
INTEREST RATE THEN
ORIGINALLY EXPECTED.

THE PROBLEM IS THAT THIS IS
VERY TRUE. A PERSONS CREDIT
RATING CAN RETURN A HIGHER
INTEREST RATE THEN ORIGINALLY EXPECTED.

HOWEVER, CAR DEALERS TAKE
ADVANTAGE BY ADDING 2 ½ POINTS
ON TOP OF THE ALREADY HIGHER
INTEREST RATE YOU ARE RECEIVING
BECAUSE OF YOUR CREDIT.

EXAMPLE:

THE CAR DEALER MAY HAVE USED
4.99% FOR THE FINANCE LOAN WHEN
THEY QUOTED YOU A MONTHLY
PAYMENT. YOUR APPROVAL FROM
THE BANK COMES BACK WITH A
HIGHER INTEREST RATE OF 5.99%
BECAUSE OF THE RISK ASSOCIATED
WITH YOUR CREDIT RATING.

THE CAR DEALER MARKS UP
THE LOAN 250 BASIS POINTS
(2 ½ POINTS) AND CHARGES
YOU 8.49% FOR YOUR LOAN.

THE REAL PROBLEM IS
FINANCE MANAGERS CAN
RAISE YOUR INTEREST RATE
EVEN IF THE BANK DID NOT!

LET US SAY YOUR APPROVAL
FROM THE BANK COMES BACK
 WITH A NORMAL INTEREST
RATE OF 4.99%

THE FINANCE MANAGER CAN
STILL MARK UP THE INTEREST
RATE 2 ½ POINTS AND CHARGE
YOU 7.49% AND TELL YOU IT IS
BECAUSE OF A LATE PAYMENT
ON YOUR SEARS CARD.

DO NOT BE FOOLED!
IF YOU HAVE GOOD CREDIT,
ONE 30 DAY LATE PAYMENT
 WILL NOT AFFECT YOUR
INTEREST RATE.