It used to be that buying a new car meant, for most, heading to a local bank to obtain financing first. While many still do make use of such services, another style of financing has become common.
Known as “indirect financing” in industry parlance, this type of lending makes a good deal more sense for many borrowers. Companies like Consumer Portfolio Services that focus on indirect financing make purchases possible for many buyers who might not normally qualify for loans.
Cutting the Banks Out of the Process and Letting Buyers Go Straight to Dealers
Under this increasingly common arrangement, hopeful car buyers skip the traditional trip to the bank and simply start shopping. Dealers who offer this type of financing will have already set up relationships with providers of indirect financing, making things easier for their customers.
To do this, a dealer will simply apply for credit, much like a conventional car buyer might, by submitting financial details and other information. If an indirect lender judges that a dealer qualifies to participate in its program, it will extend an invitation to do so.
A dealer then becomes responsible for assessing the financial status of individual buyers. Those who meet the requirements of the associated indirect lender will then normally be offered financing on the spot. Should such a sale be concluded, the dealer will then sell the loan contract on to the lender after the fact, with the customer making payments to that party.
A Flexible Way to Serve the Needs of Those Who Lack Access to Other Forms of Credit
Particularly among buyers whose credit histories are such that borrowing from a bank is not possible, this type of financing has become a mainstay of the contemporary car shopping process. Dealers who make the effort to form relationships with indirect lenders can sell vehicles to buyers who would not normally be able to afford them.
Buyers also benefit from not needing to make an additional trip to seek out financing in the first place. With the dealer being put in charge of arranging for any loan that might be needed, assistance with arranging an especially suitable purchase becomes a lot more common.