With car loans, they call it the "buy rate". Its pretty much the same thing, and allows the dealer to make money "selling" you the loan when you buy a car.
For example, you buy a new Equinox for $25,000. You ask the dealer the interest rate, and he tells you 6.9%.
Almost certainly, he is selling you that loan for 6.9%, then to the bank for something less, probably around 5.4 %. There is a formula to figure out how much that is up front, and the dealer keeps that money for making the loan. The dealer sells it to you for 6.9 percent, then to the bank for 5.4%, keeping the difference, just like he buys the car from GM for $23,000 and sells it to you for $25k.
Its easy to get "hornswaggled" in the F and I office, so I always arrange financing ahead of time, and ask if they can beat the rate. Mostly not. The F and I office always tries to sell you all kinds of warranties, protection plans and the like. I scare em: "Gee, if this new car does not have a good warranty, maybe the car is no good and I need to rethink this purchase". And, why should the manufacturer not have a good warranty?
Yea..it does not cover tires. But Im not paying $2000 to the dealer to protect my tires worth maybe half that. Tire shops sell tire warranties for about $25/tire but I rarely buy those either. Instead I get rid of tires that are about 70 percent worn. (Early). I dont try to get those "last miles" out of the tires. Remember, the 80/20 rule. 80 percent of tire problems occur in the last 20 percent of the tire life. That works with cars, too.
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