Buy Rate

The buy rate, sometimes referred to as the wholesale rate, is the minimum interest rate a lender provides to a dealership for financing a consumer’s auto loan or lease. The dealership may then add a markup, known as the “sell rate,” before presenting the final rate to the customer.

This markup is a major source of profit for dealerships, as they share in the revenue from the higher interest charges. For example, if a lender offers a buy rate of 4% APR, the dealership may present the consumer with a rate of 6% APR, pocketing the 2% difference.

While legal, this practice can cost consumers significantly over the life of a loan or lease. Regulations require disclosure of the final rate but not always the buy rate, leaving many consumers unaware that they could qualify for better terms.

For dealerships, buy rates provide flexibility in structuring deals, allowing them to adjust terms based on customer profiles and profit goals. For lenders, the buy rate represents their baseline risk-adjusted return, ensuring profitability regardless of dealer markups.

For consumers, understanding buy rates is crucial because it highlights the importance of shopping around and securing pre-approvals from banks or credit unions before visiting a dealer. Knowledge of buy rates empowers buyers to negotiate lower interest rates and avoid unnecessary markups.

Ultimately, buy rates illustrate the complex interplay between lenders, dealers, and consumers in auto financing, with transparency being the key to fair outcomes.