financing arrangement where a bank purchases, at a discount, loans originated by a car dealer or other retailer. In dealer financing, also called indirect liability the dealer's customer becomes a customer of the bank.

loan sold by a dealer or a retailer of goods, to a third party financial institution that owns the loan contract as a holder in due course and collects principal and interest payments from the borrower. Commercial banks and finance companies buy installment contracts from dealers at a discount from the face value on the notes.