Spring is a great time to start shopping for a new car, and if you’ve got your eye on something sitting in a local dealership lot, there’s one financing trick worth knowing about before you sign anything. It’s called a buy rate markup, and it can quietly add thousands of dollars to what you end up paying over the life of your loan.

Here’s how it works. When a dealer arranges financing for you, they submit your credit information to multiple lenders. Those lenders respond with an approved interest rate based on your credit profile. That approved rate is called the buy rate. What the dealer then presents to you is often a higher number, known as the sell rate. The dealer pockets the difference between the two. You never see the original rate the lender offered, so you have no way of knowing, unless you ask.

That gap between what the lender approved and what the dealer quotes you doesn’t sound dramatic in the moment. But stretch it across a four or five year loan, and the extra interest you’re paying can run into the thousands. It’s not tied to the vehicle’s sticker price, which is exactly why most buyers miss it entirely.

Dealers have built their revenue models around more than just the sale price of the vehicle. Financing arrangements are a real source of income, and the markup method keeps that income well out of sight. The U.S. Consumer Financial Protection Bureau has acknowledged that dealer-arranged financing can include compensation tied to interest rates, so this is a recognized practice across the industry, not a rare exception.

There’s another layer to watch for. Dealers often steer conversations toward monthly payment amounts rather than total loan costs or interest rates. When a salesperson focuses on whether the monthly number feels comfortable, it shifts your attention away from how the loan is actually structured. A lower monthly payment spread over a longer term can mean you’re paying significantly more in the end, especially if the rate itself has already been marked up.

So what can you do to protect yourself? A few practical steps go a long way.

Get pre-approved before you walk onto the lot. Visit your bank, credit union, or an online lender ahead of time and lock in your own rate. When you arrive at the dealership already holding a competitive offer, you have a real number to compare against whatever the dealer presents. It takes away the guessing.

Ask directly about the buy rate. You can request to see the lender’s original approved rate. Not every dealer will volunteer that information, but asking puts them on notice that you know how the process works.

Watch for red flags during the financing conversation. If a dealer presents a single rate without walking you through lender options or explaining how the loan is structured, that’s worth a follow-up question. Transparency should feel natural in that conversation, not something you have to pull out of them.

Compare the total loan cost, not just the monthly payment. Run the numbers yourself. Multiply the monthly payment by the number of months and add any fees. That figure tells the real story of what you’re agreeing to.

Consider a credit union. Many local credit unions offer auto loans at competitive rates and operate without the same markup incentives that dealerships carry. If you’re already a member somewhere nearby, it’s worth a phone call before you start shopping.

These are the people who make our neighborhoods home, and that includes the honest dealers who do right by their customers. Most financing conversations at a dealership go just fine. But knowing that a buy rate markup exists, and knowing how to spot it, puts you in a much stronger position before you sit down at that desk.

If you’re planning to visit a lot this spring, take a few minutes to check your credit score, reach out to your bank or credit union, and go in with a number already in hand. A little preparation before the paperwork starts can save a whole lot of money before the keys ever leave the building.