HomeF&I GlossaryRate Markup

Rate Markup

Definition

The difference between the lender's buy rate and the final contract rate offered to the customer.

Why It Matters

Rate markup generates finance reserve, which is a significant profit center for F&I departments. Understanding markup limits and compliance requirements is critical for ethical F&I management.

Examples

  • If the buy rate is 5.0% and the contract rate is 6.5%, the rate markup is 1.5%
  • Rate markup must comply with state and federal regulations to avoid legal issues