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Avoid Playing Auto Financing Poker  by: Daniel DeHaven Finance departments are where dealers make most of their profit (well, financing and after-market products). Their profit lies on something called the "Finance Reserve." That is the difference between the interest rate the dealer is offering you and the lower interest rate (called the "buy rate") the bank offers the dealer. For example, lets say you have a credit score of 700. The finance manager offers you a conventional loan through Generic Bank at, say, 6.9%. But what you don't know, as you sit there negotiating, is that the dealer already has a standing arrangement with the bank that says that any buyer with a credit score of 700 can have a loan at 4.9%. If you go for the 6.9%, the dealer keeps the other 2%. That's the "Finance Reserve." For the dealer, it's just gravy. Cash in his pocket. Most banks cap a dealer at 3% over the "buy rate," but not all do. According to our latest reports, Ford Motor Credit, for example, has no cap on the dealer mark up. That means you could pay anywhere from 1% to 10% more than what you actually qualify for. Don't worry, the dealers are not out to get you. This financing reserve sometimes works in your favor. It allows the dealer to offer competing interest rates to consumers who have no chance of getting that rate elsewhere! Regardless of how cards fall, smart car shoppers get their credit report score and look for loan quotes before they walk into the dealership. You can find more information and receive a no-obligation, free auto loan quote at http://www.buyingadvice.com/ About The Author Daniel DeHaven is the Editor in Chief of the BuyingAdvice Team (www.buyingadvice.com). He understands the auto business. He's been around it - all of his life. Daniel has been a consumer advocate voice for over 15 years. He has learned every trick and profit ploy car salespeople use... and mistakes buyers tend to make. Copyright © 2002-2005 BuyingAdvice.com, INC. All rights reserved. This article was posted on December 08, 2005 Read More Articles from the "Auto and Trucks" Category: Auto Theft -- What You Can Do To Protect Your Vehicle by James Strobes All About Car Shows: People Behind The Scene by Tonza Borden Audi Q7: Still Bearing the Classic Touch by Jenny McLane How Truck Insurance Premiums Are Determined by Joe Trzepla Perform Your Own Automobile Maintenance by David Maillie Making a Custom Aluminum Dashboard by Lala C. Ballatan How to Choose an Extended Warranty....... by Jack Cooper Ferrari Hype builds up with 599 GTB Fiorano by Jenny McLane How To Get The Right Car At The Right Price by Louis Rix Cadillac Car by Ray Taylor << Back to "Auto And Trucks" Index

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