Special Finance

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.

BREAKING DOWN '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. Second Chance Loan

    A type of loan associated with subprime lending and borrowers ...
  2. Financing Squeeze

    A situation in which would-be borrowers find it difficult to ...
  3. Asset Financing

    Using balance sheet assets (such as accounts receivable, short-term ...
  4. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  5. Character Loan

    A character loan is a type of unsecured loan that is made on ...
  6. Dealer Financing

    Loans that are originated by a retailer to its customers and ...
Related Articles
  1. Home & Auto

    Americans Are Borrowing More To Buy Cars - But Should They Be?

    As the economy slowly heals, credit has become easier to obtain and interest rates have gone down. But does that mean it's wise to take on a car loan right now?
  2. Investing

    What is Debt Financing?

    When a company needs to pay for something, it can pay with cash, or it may finance the purchase. Financing means that it gets the money from other businesses or sources, in return for obligations. ...
  3. Credit & Loans

    Personal Loans: Consider These Alternative Lenders

    Looking for an alternative source of financing for a personal loan? Take a look at these companies.
  4. Home & Auto

    Don't Be the Victim of Auto Loan Rip-Offs

    Subprime auto loans – and 60-day delinquencies – are up. These 4 signs of predatory auto loans can tip you off before you're caught in one.
  5. Investing News

    Subprime Auto Loans: What Borrowers Should Know

    Are subprime auto loans a disaster waiting to happen?
  6. Investing

    What is Equity Financing?

    Companies that are short on cash may need financing to pay for short-term needs or long-term capital expenditures.
  7. Credit & Loans

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  8. Economics

    What Does Finance Cover?

    Finance is the study of banking, leverage, credit, capital markets, money and investments, along with how they are used by individuals and companies.
  9. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  10. Stock Analysis

    Advance Auto Parts Continues A Winning Formula

    In a sketchy retail environment, Advance Auto keeps finding paths to profitable growth
RELATED FAQS
  1. What is the difference between the Five Cs of Credit and credit rating?

    Learn the difference between the five C's of credit and credit rating and how they are used together by banks and finance ... Read Answer >>
  2. What special powers does the government have to collect student loans?

    Contact student loan companies before student loans default, as the government has the power to get its money. Prior to default, ... Read Answer >>
  3. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  4. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  5. What economic indicators are important for investing in the automotive sector?

    Discover the most important economic indicators when investing in the automotive sector: auto sales, unemployment and consumer ... Read Answer >>
  6. What does it mean when advertisers say that "financing is available"? Should I trust ...

    When an advertisement says "financing", it means that the seller is going to give you a loan on an item that you purchase. ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center