The term in-house financing refers to financing which is provided directly by a merchant or service provider rather than through a third-party lender.
For example, a store may provide in-house financing for installment purchases or leasing arrangements rather than offering financing provided by a third party bank or lease provider. In-house financing is also common among automobile manufacturers and retailers.
In-house financing is typically offered by businesses which have a surplus of cash assets which they would like to invest at a profit. Because the company collects interest payments rather than a third-party lender – as is the case with external financing – it can potentially earn more money on each sale than it would if it were to make cash sales to customers who use external financing.
In-house leasing, such as that offered by some major Swiss automobile retailers, is a common form of in-house financing. In this case the automobile retailer itself operates its own leasing service and collects interest on leases itself, rather than selling cars to third-party leasing services which then lease them to drivers.
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