Dealer Financing Calculator
See exactly how much dealer financing costs you compared to your own bank.
What is dealer reserve and why it costs you money
When a dealer arranges financing, the bank sends them a "buy rate" — the actual rate the bank will accept for your loan. The dealer is allowed to mark that rate up, typically by up to 2–2.5%, and keep the difference as profit. That markup is called dealer reserve. On a $35,000 loan over 60 months, a 2% rate increase puts roughly $1,800 in the dealer's pocket and takes it straight out of yours.
The part that gets people is that the finance manager never mentions it. They present you a rate, you accept or negotiate on the monthly payment, and you drive home. Two months later, when you refinance through your credit union at a lower rate, you do the math and realize what happened. That's not an accident — it's the process working as designed.
The fix is simple. Get pre-approved through your bank or credit union before you walk in. That gives you a benchmark rate and removes the dealer's leverage entirely. If they want the financing business, they'll have to beat your rate. If they can't, you already have a loan ready.