What Is a Good Car Loan Rate — and Was Yours Marked Up?

A good car loan rate is the lowest APR you can get for your credit and term — and the only reliable way to know is to compare a bank or credit-union pre-approval with the dealer's offer. Dealers can add a markup to the rate a lender approves, so a dealer rate that is higher than your pre-approval may include that markup.

Short answer: A good car loan rate is the lowest APR you can get for your credit and term — and the only reliable way to know is to compare a bank or credit-union pre-approval with the dealer's offer. Dealers can add a markup to the rate a lender approves, so a dealer rate that is higher than your pre-approval may include that markup.

The problem

Most buyers never see the rate the lender actually approved. Research reviewed by the CFPB found minority borrowers have paid higher dealer markups on average — which is why every buyer should bring a pre-approval to compare.

Roosevelt's plan

  1. Get your own rate first. A pre-approval shows what a lender will offer you directly, before any dealer markup.
  2. Compare at the same term. A longer term can lower the payment while raising the total interest you pay.
  3. Ask the direct question. Ask whether the rate offered is the lender's buy rate or includes dealer participation.
  4. Choose by total cost. Use the calculator to compare total interest, not just the monthly payment.

What to say

Questions buyers ask

What is a dealer rate markup?

When a dealer arranges your loan, the lender may allow the dealer to add to the rate the lender approved. That extra is often called dealer participation or reserve.

How do I know if my rate was marked up?

Compare it with a pre-approval from a bank or credit union for the same term, and ask the dealer whether the rate includes dealer participation.

Is a lower monthly payment always better?

No. A longer term lowers the payment but usually raises the total interest. Compare APR and total cost.

Next steps

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