How Dealers Use Credit to Increase Profits
How dealers use credit to increase profits in the US—rate markup, payment focus, and bundling so you avoid overpaying.
Dealers in the U.S. use credit to increase profits by marking up the buy rate (you pay higher APR, dealer keeps reserve), focusing on payment (stretch term to hit it), or bundling price and financing so you don't see OTD or rate. Here's how dealers use credit to increase profits.
TL;DR Dealers mark up the lender's buy rate—you pay higher APR, dealer gets reserve. They also use "what payment do you want?" to stretch term or inflate price. Fix: get pre-approved, agree on OTD first, ask for buy rate. Use autopremo.com OTD calculator and payment calculator. Use autopremo.com.Rate Markup
Lender gives dealer buy rate (e.g., 6%); dealer contracts you at 8%—keeps the difference (reserve). You pay more interest. Get pre-approved elsewhere; ask "what is the buy rate?" Use autopremo.com payment calculator to see cost of markup. Get your numbers at autopremo.com.
Payment Focus
Dealer asks "what payment do you want?" and uses your credit to qualify you for a long term or higher amount—stretches term or inflates price to hit payment. Agree on OTD first; don't negotiate payment first. Use autopremo.com OTD calculator. See OTD at autopremo.com.
Bottom Line
Dealers use credit to profit: rate markup, payment focus, bundling. Avoid: pre-approval, OTD first, ask for buy rate. Use autopremo.com OTD calculator and payment calculator so you don't overpay.