Special Finance

AAA

DEFINITION of 'Special Finance'

A sector of the auto lending industry for borrowers with a limited or tainted credit history. Special financing in the auto finance industry is risk based, which means that the terms of the loan are set so that the expected returns to the lender/investor are great enough to cover the risk of default by the borrower. Special finance loans typically carry a higher interest rate than is available to borrowers with a clean credit history.

INVESTOPEDIA EXPLAINS 'Special Finance'

Special finance auto loans should be shopped around by a borrower. Like any other product, auto financing is competitive. The best way a consumer can ensure that he or she is getting a competitive market price (rate) on a special finance loan is to shop around.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  3. Impaired Credit

    A deterioration in the creditworthiness of an individual or entity. ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Subprime

    A classification of borrowers with a tarnished or limited credit ...
  6. Bad Debt

    A debt that is not collectible and therefore worthless to the ...
Related Articles
  1. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

  2. New Wheels: Lease Or Buy?
    Home & Auto

    New Wheels: Lease Or Buy?

  3. How is my credit score calculated?
    Credit & Loans

    How is my credit score calculated?

  4. The 5 Things You Never Knew About Auto ...
    Credit & Loans

    The 5 Things You Never Knew About Auto ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center