Dealer Reserve

Dealer reserve, also known as dealer rate participation, is the portion of the finance interest rate that a dealership earns when arranging a car loan. When a customer finances through a dealership’s lending partners, the lender may offer the loan at a “buy rate” (e.g., 6% APR) and allow the dealer to offer it to the customer at a slightly higher rate (e.g., 7%). The difference (1% in this example) is the dealer reserve, essentially commission for arranging the financing. In Canada, this practice must be done transparently and ethically; dealerships must adhere to provincial regulations and avoid discriminatory pricing, ensuring customers are treated fairly while the dealership earns additional profit for facilitating the loan.