Dealer reserve lets dealers mark up your auto loan rate 2-3% without disclosure

When a dealership arranges financing, the lender provides a 'buy rate' but the dealer can silently add 2-3 percentage points as a 'dealer reserve' kickback, pocketing the spread. This costs American car buyers $25.8 billion in excess interest over the lives of their loans, and no law requires the dealer to disclose the markup or even tell you a lower rate was available. The system persists because lenders benefit from higher interest revenue they share with dealers, dealers are classified as arrangers rather than lenders so they dodge lending disclosure rules, and the consumer never sees the buy rate to know they are overpaying.