Apart from your house, your car is likely to be the biggest investment you make. As with mortgages, the high cost of the purchase will often require you to take out a loan to pay the vehicle off. But where did the car loan begin? Even a little knowledge on the history of car loans will help you understand where they came from, and how that affects your purchase.
Billy Durant
After the first automobile was invented by the McLaughlin-Buick company, and more famously mass produced by Henry Ford, car registration grew in popularity during the early 20th century. But by 1910, there were still only 6,000 cars on the roads of America, and horses remained the most popular mode of transport.
Enter William Durant, salesman, entrepreneur, visionary. Durant founded General Motors and united the fledgling and disparate industry under common management - even launching a failed attempt to buy Ford. Despite not being a huge fan of cars - deeming them noisy, smelly, and frightening to animals - Billy Durant went on to become a true legend in the automotive industry. And he was the first to introduce car loans as a way of financing purchases. But how did the concept come about?
In the early days of the industry dealers had to pay cash for their stock, which meant they could only buy a few cars at a time. As mass production took hold, the assembly line was capable of producing more cars than dealers could afford. The only way round this was for the manufacturers to offer finance to dealers, who in turn could offer finance to their customers. This was the beginning of the hire purchase age, and everything from property to clothes could be paid off in instalments to suit the consumer. However, Billy Durant's finance system was not without it's detractors - including Henry Ford, who believed that financing car purchases would spell the end for America's economy. Durant knew they were wrong, and his vision reached fruition with the founding of General Motors Acceptance Corporation (GMAC), the first automobile-specific loans company. In 1919, GMAC branches opened in Detroit, Chicago, New York, San Francisco and Toronto. In 1920 they expanded to Britain, and by 1928, they had 4 million contracts under their belt. By the mid-eighties, GMAC were achieving annual earnings in excess of $1billion, and they now operate in 41 countries.
Such is the profitability of the car loan industry, that now all car manufacturers offer some kind of financing, and even banks have a piece of this fiercely competitive market.
Today you can get car loans from companies such as Alliance & Leicester or join the growing number of people applying for loans online.
As for paying off that loan, we'll leave the last word to Billy himself: 'Forget past mistakes. Forget failures. Forget everything except what you're going to do now and do it.'
