Dealer Reserve / Finance Participation

Dealer reserve (also called "finance participation" or "rate participation") is the commission the dealer earns when arranging your loan through a captive or third-party lender. The lender quotes a buy rate; the dealer quotes you a "contract rate" 1-3 percentage points higher and pockets the spread as reserve. Most lenders cap reserve at 1-2.5 points or $1,500-$2,000 absolute. On a 60-month $35,000 loan, a 2-point rate bump costs you roughly $2,000 in total interest. Walk in with a credit union pre-approval and the dealer has to match or beat your rate to capture any reserve — the spread you save is real money.