A new financial service provider is using the Internet to speed up the processing of home equity loans for vehicle purchases.
The firm, iauto mortgage, claims that it's the first to launch an “instant” process of getting such loans right at the dealership.
Founded by Scott Steele, a veteran of the real estate information services industry, iauto mortgage developed the web-based process that allows homeowners to finance their automobile purchases with the proceeds of home equity loans that originate through and are executed at the dealership.
In the first transaction, Bill Salladin, of Cockeysville, MD, bought a 2001F-150 SuperCrew 4-door truck from Plaza Ford in Bel Air using his home equity to finance the $38,500 purchase with the assistance of Baltimore-based iauto mortgage working in conjunction with American Bank FSB.
Now iauto mortage is trying to build a national network of dealers.
In addition, a consumer site will soon be launched to allow potential buyers to obtain pre-approval for home equity loans. The iauto mortgage process facilitates instant loan approval, underwriting and closing — unlike traditional home equity financing which can often take weeks to approve and complete.
The concept of using home equity loan proceeds to finance an auto purchase is not new, but in the past the process often required lengthy waiting periods, appraisal services, bank meetings, and copious document execution, says iauto mortgage spokeswoman Brandy Sims.
Because of the time and effort involved, dealers typically were hesitant to suggest such financing.
But she contends that iauto mortgage allows consumers to obtain a home equity loan without leaving the showroom floor.
Auto sales represent the largest retail sector in the country. Total new- and used-vehicle retail sales topped $600 billion in 1999.
Ms. Sims says it's hard to pinpoint what percentage of that market would likely finance a vehicle purchase with an instant home equity loan.
But she says there are some indicators. For instance, Of the 17.4 million new vehicles sold in the U.S. last year, about 787,000 were valued at $38,000 or more.
There were 71.6 million homeowners in the U.S., a fourth of whom borrowed against the equity in their homes, according to Wells Fargo Home Equity Service.
Only 5% of all home equity loans were used to finance vehicle purchases, according to the Consumer Bankers' Association.