The subject of car financing consists of a variety of financial products that allow a person to get a car with any arrangement other than a single silent payment. Provision of car financing by third party suppliers allows the acquirer to provide and raise funds to compensate for the original owner, either the dealer or the manufacturer.
Car financing is required both by individuals and private businesses. All types of financial products are available for both sectors, but market share by type of financing for each sector is different, in part because the leased business contract can provide tax benefits and cash flow to the business.
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Personal Car Financing
Personal Car Finance is a complete personal finance sub-sector, with many different products available. This includes direct car loans, rental purchases, personal contracts (car rentals) and Private Contract Purchases. Therefore, car financing includes but is not limited to vehicle rentals. Various types of car financing are possible due to the high residual value of cars and used car market, which allows other forms of financing beyond loans without pure guarantees.
Car financing arises because car prices are out of reach of individual buyers without borrowing money. Funding for private car financing is provided by either a retail bank or a specialist car finance company. Some car manufacturers have their own car financing weapons, such as Ford with Ford Motor Credit Company and General Motors with its GMAC Financial Services arm, which has now been renamed and branded Ally Financial. Automatic lenders can not directly set a risk-based interest rate, or "buy rate," which is delivered to car dealers. Car companies can then allow their car dealers to charge higher interest rates when they settle the deal with the consumer. This is usually called "dealer markup." Markup can generate compensation for dealers and some (people from Ally GM and Honda) have been found to use the discretion to charge different prices to consumers regardless of consumer credit worthiness.
The funding supplier may retain car ownership during the contract period for certain types of financing. Temporary ownership by third parties and subsequent leases to the acquirer are much more typical for business assets than personal ones, with vehicle leasing options being the primary exception for private consumers. Finance is arranged either by dealers who provide cars or by independent financial brokers who work on commission basis.
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Spot delivery
Spot delivery (or spot financing ) is a term used in the automotive industry which means the delivery of vehicles to the buyer before financing on the finished vehicle. Place shipping is used by dealers on weekends or after bank hours to be able to ship a vehicle when final approval is not acceptable from the bank. This delivery method is governed by many states in the US, and is sometimes referred to as "Yo-Yo sales" or "Yo-Yo Financing."
See also
- Car cost
References
External links
- Auto Financing: Market Trends from Canadian Consumer Financial Institutions
Source of the article : Wikipedia
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