Car Buying Interest Rates

[Luvgcz]

As we have seen, car dealers advertise super low interest rates for buyers with pristene credit. My question: Do the closers at these car dealers(new and used) get a commission for pumping up the interest rates on the sales of cars to unsuspecting(?) buyers with lesser quality credit scores?

[Springfield]

Of course they do, this is called "participation" in the business, typically dealerships are allowed to mark up a "buy rate" by up to 3%.....they earn the extra money from that. Most banks require the loan to be open at least 90 days (meaning the customer can't pay it off in the first 90 days, otherwise the dealer is charged back the participation they earned).

[Lanny]

This is why it is important to be pre-qualified before you venture into a dealership. Most people do this when house shopping, but some fail to do when car shopping. Simply go to your bank or credit union (and some large insurance companies, like State Farm, etc) and see what they will approve you for.
Armed with this information, you are FAR less susceptible to this dealer practice.
Rates are low right now, good luck...

Lanny

[hd]

Few years ago I bought a car with pre-approved loan of 1.99%, when the salesman ask me about financing I said I already had a loan set up. I had over 25% down also, and he came back with a 1.90% offer. I took the 1.90, not that much difference, but 0.09 is 0.09 in my pocket.

As said, do a little homework and don't jump at the first offer.