Dealer Financing

AAA

DEFINITION of 'Dealer Financing'

Loans that are originated by a retailer to its customers and are then sold to a bank or other third-party financial institution. The bank purchases these loans at a discount and then collects principle and interest payments from the borrower. Also called an indirect loan.

BREAKING DOWN 'Dealer Financing'

A well-known example of dealer financing is auto dealers that offer car purchase financing. Many car dealers markup the finance company's interest rate and keep the difference as additional profit.

RELATED TERMS
  1. Dealer Incentive

    A corporate sales strategy in which the price a dealer has to ...
  2. Time-Sale Financing

    A form of indirect dealer lending or financing used by banks ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Financing

    The act of providing funds for business activities, making purchases ...
  5. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  6. Combination Loan

    1. A transaction consisting of two separate loans for the same ...
Related Articles
  1. Options & Futures

    Leveraged Investment Showdown

    Margin loans, futures and ETF options can all mean better returns, but which one should you pick?
  2. Entrepreneurship

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  3. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  4. Options & Futures

    Car Title Loans: Good Option For Fast Cash?

    These loans provide fast cash, but they could leave you deeper in debt - and without a car.
  5. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  6. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  7. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  8. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  9. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  10. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  4. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  5. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>
  6. How does an investor compute a Seasonally Adjusted Annual Rate of Sales for an automotive ...

    The seasonally adjusted annual rate of sales (SAAR) for an automotive company can be calculated by taking the unadjusted ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!