Auto loan means a personal loan given to someone for purchasing automobiles. It comprises various financial products which allow someone to get an automobile or car with any arrangement other than a single lump amount. The provision of auto loan by a third party supplier allows the acquirer to make arrangements to compensate the initial owner, either a dealer or manufacturer. Both private individuals and businesses acquire auto loan. All sorts of auto loans are available for either sector; however the market share by finance type for each sector differs, because business contract line can provide tax and cash flow benefits to the business.
PERSONAL AUTO LOANS
Personal auto loan is a complete subsector of personal financing, with different numerous products available. These include car loan, hire purchase, personal contract line (car leasing) and personal contract purchase. Therefore auto loan includes but is not only limited to vehicle leasing. All these different types of car loans are possible because of the high residual value of cars and the second hand car market, which enables other forms of financing beyond pure unsecured loans.
Auto loan started because the price of the car was out of the reach of individual customers without borrowing money. A retail bank or a specialist car financing company may provide the funding for personal auto loans. Some car manufacturers have their own car financing arms, such as the Ford with Ford Motor Credit Company and General Motors with its GMAC financial services arm, which have now been rebranded as Ally Financial.
The funding supplier may retain the car ownership during the period of contract for certain types of financing. The interim ownership by a third party and the subsequent leasing to the acquirer is far more typical for business assets than private ones, with the option of vehicle leasing being the major exception for private consumers. The finance is arranged either by the dealer who provides the car or by the independent finance brokers who work on commission. Individual brokers will provide any solution for which the individual can get credit approval, but their own particular lifestyle and cost considerations that should determine the choice of finance option.
The leasing of the US consumer automotive industry expected to grow by 18-25% though this is growing again after the credit crisis cause major leasing companies to exit the market in the US. The credit crisis of 2008 and subsequent recession saw the second hand car market collapse and the funding companies had to sell their returning cars at much lower prices than expected. Some major providers stopped offering private contract hire during this period. In the UK, FCA took over from the OFT in AAPRIL, 2012. All companies who sell, advise, or promote financial products must be regulated and licensed under FCA legislation. The Finance and Leasing Association (FLA) represents the asset, motor and consumer industry in the UK, which includes auto loan. The FLA has a neutral website which explains all expects of auto loan for the private individual in the UK.