Dealer incentive could make loan costly

Bankrate Logo

Why you can trust Bankrate

While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .

Dear Terry,
I recently went into a dealer looking to buy a car. When we started talking about financing, the dealer brought me interest rates that were higher than usual.

When I confronted the dealer about how high the rates were, he asked what I would like to see. I told him in the range of between 4 percent to 5 percent.

About two minutes later, he came back to me with about what I wanted. Do the dealers get any kind of bigger kickback to finance autos at a higher rate? Or do they just not care and go with the lender they normally work with?


Dear Mike,
Dealers get incentives from loan companies if they steer customers their way. If they can talk the buyer into a higher interest rate than they would otherwise qualify for, the bonus to the dealer may be higher.

This is why it’s always important to know your credit score before shopping for a car. That way, you won’t be pushed into a more expensive loan.

If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car — sign up for Bankrate’s new weekend Car & Money newsletter