In-House Financing – The Ins and Outs

Posted Saturday, Sep 30, 2023


In-house financing is a retailer's direct financing to a consumer. It allows consumers to buy or finance goods directly from the sellers. It eliminates reliance on third-party lenders that provide consumer funds for completing transactions. In-house financing happens across various industries, like the ones mentioned below.

Types of In-House Financing


Insurance companies don’t cover certain medical expenses because of the different procedures involved. These procedures involve elective treatments like plastic surgery and cosmetic dentistry.

In such cases, the provider will provide in-house financing if the consumer doesn’t have the money upfront. In-house financing allows medical professionals to set their own terms as their clients are likely to return in the future.


In-house financing is very common for big-box stores and larger retailers. These retailers deal primarily with expensive items like building supplies, furniture, and electronic appliances.

The financing comes in the form of credit cards or loans. These credit cards are limited to the retailer.

Lowe, Apple, and Home Depot are some of the biggest names offering in-house financing in the retail sector.

Automotive Industry

In-house financing is incredibly common in the automotive industry. Automotive companies are used to clients taking auto loans for closing vehicle purchases.

In-house financing helps automotive companies set their own underwriting standards. It includes many borrowers by accepting those with a lower credit score.

In most cases, automotive companies accept borrowers that banks and other lenders turn down.

Example of In-House Financing in the Automotive Industry

Ford Credit is one of the most famous in-house financing establishments. In 2017, the group partnered with AutoFi.

Together, they made the purchasing and financing of cars easier. With technology, they enabled customers to buy cars and apply for financing online.

With their innovative point-of-sale platform, consumers can easily shop online through Ford’s dealership websites.

The process saves consumers a lot of time - time potential buyers would have otherwise spent at a dealership. It also provides Ford with a fast and efficient sales process.

How Does Car Financing Work In-House?

When it comes to an in-house car financing, the car dealer provides the buyer with a percentage of the car’s purchase price. This way, the seller benefits from the interest payments coming in from the buyer.

This trade provides the seller with an alternative income stream while providing the buyer with enough money to buy the car - something they might not have qualified for otherwise.

What’s Better: Bank or In-House Financing?

There is no clear winner in this debate. What matters is the interest rate. If either of the two offers an affordable interest rate, you should opt for them right away.

In some cases, the dealership might charge interest based on the car’s current price, which is more affordable for the buyers.

Conversely, dealer financing includes extra fees, mostly in the form of markup. However, not all car dealerships offer this expensive form of financing.

Most used car dealers specialize in auto loans. They can offer attractive interest rates on new cars using their expertise.

Some car dealers also offer a promotional 0% financing, especially during the first year on a new vehicle.

Why Do Retail Stores Offer In-House Financing?

As discussed above, a retail store offers loans or credit cards to its customers. These modes of financing open a new revenue stream for the store.

It is worth noting that the interest rates are higher when you use dealership-provided credit cards. However, these credit cards and loans offer a variety of rewards and perks to consumers, especially if they are regular shoppers.

A Few Things to Consider

With the rise of FinTech companies, today's consumers have better access to in-house financing options.

These in-house financing options are built around the credit departments of companies that work in-house. They are also supported by the company’s single credit provider it partners with to fulfill its consumers’ lending needs.

Point-of-sale financing makes the lending process easier for buyers by allowing them to apply for credit when they are ready to make the purchase.

The better the credit score, the easier and quicker it will be for consumers to get approved. With a good credit score, they might even get a higher limit.

Credit-backed sales are becoming increasingly popular, and many merchants now offer it.

While only a handful of businesses used credit-backed sales a few years back, its popularity skyrocketed during the pandemic.

Interestingly, since the start of the pandemic, FinTech companies have earned a revenue of $8-10 billion from traditional lenders.

According to some estimates, more than 15% of the purchases by the end of 2023 will be done according to the credit-backed sales method.

Pros and Cons of In-House Financing

Pro#1: Realistic Shopping

You will hand over your financial information first. The dealer will know your exact budget before showing you a vehicle.

Pro#2: Improves Your Credit

In-house financing helps you improve your credit provided you make your payments on time. The lender also benefits from the interest on the loan, so everybody wins.

Pro#3: Helps You Afford a Better Car

While your current finances might allow you to buy a used older model of a particular car, with in-house financing, you can get a newer model with the latest features.

Con#1: Higher Interest

Unlike traditional lenders, in-house financing options have higher interest rates. However, there are ways around this, like paying a higher down payment. Whatever you do, it is best for you to negotiate a lower interest rate.

Con#2: Sales-Pitch Financing

Some buyers are concerned that the sales pitch at the dealership will prevent them from receiving a decent financing offer. Besides selling you a car, a car dealership makes sure you make payments on time, which is not a bad thing. It is better to prepare yourself with budgetary guidelines.

Final Word

Despite the downsides, in-house financing allows consumers to afford vehicles they might not have the budget for otherwise. The trick is to keep an eye on the interest rates before signing any paperwork.

Try to limit the interest rates as much as possible. The best way to do so is by handing over a good down payment.