What is Buy Rate?

The buy rate is the interest rate a lender offers the dealership for a particular customer based on credit and deal criteria. It is the wholesale rate the dealer buys the loan at. The dealership may then present the customer a slightly higher contract rate, and the difference, known as dealer reserve or markup, is compensation the lender pays the dealer for originating the loan. Buy rates vary by credit tier, term, and loan-to-value. Canadian F&I offices must balance reasonable rate participation against fair-dealing expectations and provincial disclosure rules. Understanding the buy rate helps managers structure deals that get approved while remaining competitive, since customers can often shop financing independently and will notice an uncompetitive contract rate.