In-house car financing is a plan where the retailer provides its own financing for customers as an incentive for them to purchase the goods or services that are being marketed. This would be in
opposition to a customer going to his or her bank, and taking out a loan there for the same purpose.
This has been a common practice in the major retailing industry for years, but it has become more popular in the automobile industry in recent years, and especially in markets where the customers might not be such good credit risks.
If a customer has poor credit or no credit, odds are that a bank would turn that individual down for a loan, but car dealerships, and particularly used car dealerships have found this type of arrangement profitable enough to institute it in their overall scheme of things.
For a used car dealership, it might be profitable to institute in-house car financing if the conditions are right to do so. Some used car lots have been using this method for years, because their major market just might be in a lower income class of people. These would be people who have manual labor jobs, they deal in cash because that is how they are paid, and that is how they think.
There are many people who go into their local car dealership and pick out a car based upon how much the weekly payment will be. The sales person asks the prospective buyer how much he can afford per week, and when he gets the answer, he will take the person to the car or cars that fit that weekly cost factor.
The interest rates on these types of transactions are higher that those that would be found at a bank, but keep in mind that these people don’t normally deal with banks. Also, the car dealer will keep a very tight reign on the vehicles that are sold, because there will be a percentage of them that will be coming back due to inability to pay.
The used car dealers have taken to placing a GPS tracking device in the vehicle, so its whereabouts will be known at all times. If the car needs to be picked up, there will never be a doubt as to its location. If the car comes back in fairly good shape, it can just be resold to someone else.
This is not a foolproof system, but it works well enough to be a very viable method of marketing automobiles to this segment of society. For many people this is the only way that they will ever be able to buy a car.
Banks are not going to lend them the money, and neither is anyone else, except the pawn shop or the payday loan company. Payday loans are too short a term in nature to fit the scheme of buying a car, so that leaves the local used car store.
Many independent used car entrepreneurs have had to figure out a way to sell cars in this down economy, and the in-house car financing of cars has been one way to keep their businesses alive, when many other business around them are falling apart.
If a used car lot owner can finance his cars to people in this financial category, and keep close tabs on the people that he is selling them to, then he has a legitimate chance of making it work. Even if the buyer defaults on his payment, the car dealer gets his car back, and the payments that were made by the buyer is profit to some degree, and the dealer can then resell the car. Apply now and drive your new car home today!