When you finance a car through the dealer, how much commission does the dealer get from the lender?

Question

I know the car dealer makes a commission on the note. But I don't know how much that is. Is it commonly a percentage, or a flat fee, or what?

Answer 1

The dealer can make points, so if a lender approves you for 7% the dealer may charge you 9%, then the dealer and the lender split this 2% usually 75/25 with the 75 going to dealer. The most that most lenders allow is usually 3 points, but 2 is most common. They may also not be allowed to make any in which case the bank just pays them a flat commonly $100-$200, just for sending them the loan.

The other person was corrrect in saying sometimes the dealer may have to pay a fee just to get you financed, but by law they cannot pass this fee along to you. And they can usually still make points.

Hope this helps

10 yrs in auto biz

Answer 2

It depends. You have to remember that most dealers dont finance thier own car. The dealer has a finance department that has access to various lenders. Each lender sends over a current APR guide.

Now, if the dealer sells you the APR at buy rate, or the rate the dealer is charged, the dealer will get a flat commision. If the dealer sells you a rate say 1pt higher then the buy rate, the dealer will collect a commision equal to 70-80% of the value of that point. So if that point value is $500.00, the dealer will make a commision of $400.00 (@ 80%)

Most states now cap the dealer mark-up to no more then three points over the buy-rate. Most consumers are smart enough to not be charged 3 points over buy-rate.

Hope that helps! Good luck.

Answer 3

The dealer doesn't necessarily get a 'commission' . In fact sometimes the lenders actually CHARGE the dealer an acquisition fee! This is generally the case if the borrower has less that stellar credit.
And when Manufacturers offer special low (or 0%) APR's the dealer makes nothing !
VERY few lenders allow any mark-up at all.

Answer 4

It is illegal if done! ~