I’m curious about the reasons behind lenders selling car notes. What are the advantages or benefits for lenders in doing this? Also, how does this practice affect borrowers and the overall car financing market?
Lenders sell car notes for a few reasons. From what I understand, one big reason is cash flow. By selling the note, they get a lump sum of money upfront, which they can then use to make new loans or invest elsewhere. It’s like they’re freeing up cash tied to long-term payments. This can also help them manage risk; if they think there’s a chance the borrower might default, selling the note can mitigate potential losses.
For borrowers, I think the impact is kind of indirect. You might not notice much change if your loan gets sold unless the new owner decides to change the terms or the way they handle customer service. For the car financing market, this kind of trading might help keep liquidity high and might actually make it easier for more people to get loans in the first place because lenders can keep cycling money back into new loans. But that’s just one take on it.