Dealer Financing

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.

Investopedia explains '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.


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