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finance house

A Dictionary of Business and Management | 2006 | © A Dictionary of Business and Management 2006, originally published by Oxford University Press 2006. (Hide copyright information) Copyright

finance house An organization, many of which are owned by commercial banks, that provides finance for hire-purchase or leasing agreements. A consumer, who buys an expensive item (such as a car) from a trader and does not wish to pay cash, enters into a hire-purchase contract with the finance house, who collects the deposit and instalments. The finance house pays the trader the cash price in full, borrowing from the commercial banks in order to do so. The finance house's profit is the difference between the low rate of interest it pays to the commercial banks to borrow and the high rate it charges the consumer.

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