What is ‘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.
Explaining ‘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.
Further Reading
- What financing data reveal about dealer leverage – papers.ssrn.com [PDF]
- The federal reserve's primary dealer credit facility – papers.ssrn.com [PDF]
- Matching collateral supply and financing demands in dealer banks – papers.ssrn.com [PDF]
- Prone to fail: The pre-crisis financial system – www.aeaweb.org [PDF]
- Collateral values by asset class: Evidence from primary securities dealers – academic.oup.com [PDF]
- Market liquidity after the financial crisis – www.annualreviews.org [PDF]
- Financial management practices and farm profitability – www.emerald.com [PDF]
- How do Treasury dealers manage their positions? – papers.ssrn.com [PDF]
- Credit supply disruptions: From credit crunches to financial crisis – www.annualreviews.org [PDF]
