To vehicle buyers, automotive financing often seems to be fairly simple, but that perception can turn out to be mistaken. Some buyers will arrange for financing on their own by visiting a local credit union or bank before even beginning the process of shopping. Others will work with dealers to arrive at financing deals, with some even saving a significant amount of money by doing so. While lenders and dealers strive to make things as simple as possible for vehicle buyers, there is generally quite a bit more going on behind the scenes. While they are not necessarily always familiar to the average buyer, for example, companies like Consumer Portfolio Services Inc play truly important roles behind the scenes.
In many cases today, loans of various kinds end up being held and serviced not by the entity that originally extends them, but by another business or organization, instead. Most mortgages today, for instance, will be sold on to another holder by the lender that originates them, with only a few of the largest banks routinely retaining ownership of the loans they issue. In the automotive industry, arrangements like these have started to become much more common, as well, particularly in the case of buyers whose credit histories are such that they would normally be considered risky borrowers.
What happens in many cases today is that a dealer who specializes in working with such buyers will extend a loan at the time of purchase, but then sell this to a specialized company thereafter. Typically far better capitalized and readier to handle the servicing of loans than the small, locally oriented dealers they work with, businesses like these thereby make it possible for even buyers with markedly poor credit records to obtain financing.
For buyers themselves, not much will typically change. In many cases, a loan will be sold through a pre-existing arrangement virtually as soon as it is issued, meaning that payments will be sent to the buyer right from the start. What will generally matter the most will simply be the fact that a vehicle buyer will be able to have a purchase financed where that would otherwise not be realistic or even possible.