Auto Lending

Americans owed $1.713 trillion on auto loans at the end of June 2026, and $211 billion of new auto loans appeared on credit reports in that quarter alone. Most of it wasn't arranged at a bank. A car buyer usually applies for credit at the dealership, where the dealer sends the application to several lenders at once, takes the best approval, writes a retail installment contract in its own name and sells it to the lender the same day, keeping part of the interest rate as its fee. The lender on the other end might be a bank, a credit union, the manufacturer's own finance company or a subprime specialist, and it holds a loan secured by an asset that loses value from the moment it's driven off the lot, can be taken back without a court, and is titled by a state that records the lender's lien.

This chapter covers the lender's side of that transaction: the market and its lenders, direct and indirect lending, dealer markup and how regulators have treated it, captive finance companies and the subsidized rates they offer, subprime and buy-here-pay-here lending, leases under Regulation M (with worked numbers), GAP and other add-on products and the refunds they owe, repossession under Article 9, and electronic contracts. The dealer's side (the deal, desking, the F&I office, the CARS Rule's history, titling) is in the Commerce volume's Automotive Retail, and this chapter links to it rather than repeating it. The installment arithmetic is in Personal & Installment Loans.

How the Platforms Do It#

As of October 2026, from the lenders' latest filings:

Lender	Type	Scale	Credit and channel
Ally Financial	Bank holding company, indirect lender	15.5 million consumer auto applications and $43.7 billion of consumer originations in 2025; $94.3 billion of consumer auto earning assets	62% of 2025 originations used vehicles; 9.74% originated yield; 4Q25 retail auto net charge-offs 2.14%; $4.4 billion of lease originations in 2025
Capital One	Bank	$83.6 billion of auto loans at December 2025	December 2025: 2.07% annualized net charge-offs, 5.23% 30+ day delinquency
GM Financial	Captive of General Motors	$75.4 billion of retail finance receivables; $55.9 billion of 2025 retail loan and lease originations	33.3% of GM's US retail sales in 2025 (38.9% in 2024); 74.9% prime, 12.8% sub-prime by year-end receivables; 1.3% net charge-offs; floorplan for 2,554 dealers
Ford Motor Credit	Captive of Ford	$146.3 billion of net receivables; 745,000 US contract placements in 2025	41% of Ford and Lincoln US retail sales (53% in 2024); 59 bps US retail loss-to-receivables; average original terms of 65 months (loans) and 37 months (leases)
Toyota Motor Credit	Captive of Toyota (fiscal year to March 31, 2026)	$6.5 billion of operating lease revenue	Revenue mix 64% retail, 25% operating leases, 11% dealer; most leases and a significant share of retail contracts subvened
Credit Acceptance	Subprime indirect lender	15,745 active dealers; $3.86 billion of 2025 assignments	79.5% of 2025 units to consumers with FICO scores below 650 or none; Portfolio and Purchase programs (below)
CarMax Auto Finance	Retailer's own finance arm	$16.4 billion portfolio	Financed 42.4% of CarMax's retail used units in fiscal 2026; third-party lenders paid or paying a fixed fee per contract
Santander Consumer USA	Bank subsidiary (Santander Holdings USA)	Not in the sources here	Its 10-year private-label agreement with Stellantis (Chrysler Capital) was terminated effective September 15, 2025; its bank applied in December 2025 to merge Santander Consumer into it

Three things stand out. The channel is the dealer: Ally's 15.5 million applications are dealer submissions, not consumers visiting Ally, and Credit Acceptance has no direct consumer channel at all. Captive share moves with subsidies: GM Financial's and Ford Credit's shares of their parents' sales both fell between 2024 and 2025, and the captives exist largely to carry the manufacturer's promotional rates and leases. Credit tiers live side by side: GM Financial reports 12.8% of its book sub-prime, Ally reports 43% of its 2025 volume in its highest credit tier, and Credit Acceptance lends almost entirely below 650.

The Market#

The Federal Reserve Bank of New York's household debt report for the second quarter of 2026 put auto loan balances at $1.713 trillion, up $28 billion in the quarter, with an annualized 3.00% of auto balances flowing into serious delinquency (90 days or more), up from 2.93% a year earlier. Rates, from the Federal Reserve's G.19 release: commercial banks charged 7.54% on 60-month new car loans and 7.17% on 72-month loans in August 2026, and finance companies' new car loans in the second quarter of 2026 averaged 6.3% over 67 months on $41,705 financed. My reading is that captives' subsidized promotional rates pull the finance company figure below the bank rate.

The CFPB supervises nonbank auto lenders, under its larger participant rule, when they have at least 10,000 aggregate annual originations (loans, leases, refinancings and purchases of those obligations, counted with affiliates over the preceding calendar year), excluding the dealers that Dodd-Frank section 1029 keeps outside its authority (12 CFR 1090.108). That exclusion, and its exception for buy-here-pay-here dealers, is covered in F&I: Financing, Leases and Add-Ons.

Direct and Indirect Lending#

Direct lending is a loan the consumer applies for with the lender: a bank or credit union preapproval taken to the dealer, an online lender's purchase or refinance loan. The lender writes the note, discloses under Regulation Z, and records its lien when the title is issued.

Indirect lending is the dealer channel, and it's most of the market for every lender in the table above except the direct refinancers:

1. The dealer submits the application through a credit network (Commerce's Dealer Management Systems names Dealertrack) to one or several lenders under each lender's dealer agreement.
2. Each lender decides and quotes a buy rate, the risk-based rate at which it will buy the contract, with conditions: maximum amount financed, maximum loan-to-value and term, required down payment, stipulations (proof of income, residence, insurance).
3. The dealer writes a retail installment contract (RIC) with the consumer, as the original creditor, at a contract rate that may be above the buy rate. The contract carries the Regulation Z credit sale disclosures (amount financed, finance charge, APR, total of payments and the total sale price, 12 CFR 1026.18) and the FTC Holder Rule notice.
4. The dealer assigns the contract to the lender, which funds the dealer (the amount financed, plus or minus the dealer's compensation) once the funding package (signed contract, title application, stipulations) is complete.
5. The lender perfects its lien through the state title, on paper or by electronic lien and title (Commerce's Titling and Registration), and services the contract.

What indirect lending means for the system: the application comes from a dealer, not the consumer; one consumer's application may be decided by five lenders in minutes; the contract is written by someone else and has to be checked against the approval before funding (amount, rate, term, products, the disclosures' arithmetic); and the lender is liable for what the dealer did, through the Holder Rule and its own fair lending duties.

The Holder Rule. Every consumer credit contract arising from a sale (and every purchase money loan the seller arranges) must carry, in at least ten-point bold type, the notice that "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER," with recovery limited to the amounts the debtor paid (16 CFR 433.2). The lender that buys the contract inherits the buyer's claims against the dealer. In January 2022 the FTC issued an advisory opinion, by a 4-0 vote, that the rule doesn't prevent state laws from awarding costs or attorneys' fees against the holder.

Dealer Markup and Participation#

The CFPB's description is the standard one: the lender sets a risk-based buy rate, lets the dealer mark it up, and pays the dealer a share of the extra interest, called reserve or participation. Lenders compute and pay it differently (a share of the added finance charge, or a flat fee per contract), and the terms, including whether an early payoff claws the reserve back, live in each lender's dealer agreement, not in public documents.

Worked numbers. A $30,000 contract over 60 months with a buy rate of 6.00% has a payment of $579.98 and a finance charge of $4,798.80. Marked up 1.25 points to 7.25%, the payment is $597.58 and the finance charge $5,854.80: the markup costs the consumer $17.60 a month and $1,056.00 over the term, and the dealer's reserve is the share of that $1,056 its agreement sets. The consumer sees one APR; the buy rate isn't on the contract.

The regulatory history:

• Ally (December 20, 2013). The CFPB and the Department of Justice ordered Ally to pay $80 million in damages and an $18 million penalty under the Equal Credit Opportunity Act, finding that its markup policy led to higher rates for more than 235,000 minority borrowers between April 2011 and December 2013. Ally had to monitor dealer markups and compensate harmed borrowers each year, or move to a non-discretionary compensation structure.
• Honda (July 14, 2015). A CFPB and DOJ resolution with $24 million of restitution capped Honda's dealer markup at 1.25 points above the buy rate for terms of five years or less and 1 point for longer terms (down from 2.25 and 2 points), with non-discretionary compensation as the alternative. The worked example above uses that cap.
• The 2013 bulletin's disapproval (May 21, 2018). Congress disapproved CFPB Bulletin 2013-02, "Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act," under the Congressional Review Act (Public Law 115-172); it "shall have no force or effect." The Equal Credit Opportunity Act and Regulation B still apply to the lender; how far disparate impact reaches under them after the 2026 Regulation B rule is covered in Fair Lending, HMDA & 1071.
• Flat fees. CarMax pays, or is paid by, its third-party lenders "a fixed, pre-negotiated fee per contract" that doesn't vary with the amount financed, the non-discretionary structure the 2013 and 2015 orders pointed to.

For the system: store the buy rate, the contract rate, the markup and the reserve computation on every contract, monitor markup by dealer and by any proxy for a prohibited basis your fair lending program uses, and enforce the dealer agreement's cap at funding, not in a monthly report.

Captive Finance#

A captive is a manufacturer's finance company: GM Financial ("the wholly-owned captive finance subsidiary of GM"), Ford Motor Credit, Toyota Motor Credit, and their peers. Captives do three things a bank doesn't:

• Subvention. The manufacturer pays the captive to offer below-market rates and lease terms on the models it wants to move. Toyota Motor Credit says "the majority of our lease contracts and a significant portion of our retail contracts are subvened," with Toyota's distributor paying "the majority of the difference between our standard rate and the promotional rate"; GM offers subvention programs under which it makes cash payments to GM Financial; Ford makes interest supplements and other support payments to Ford Credit. In the ledger, subvention is income the captive recognizes over the contract's life (the economics of a 1.9% loan are the 1.9% plus the manufacturer's payment), so the contract record needs the subvention amount and its recognition schedule, not just the consumer's rate.
• Leases. Captives write most of their brands' leases and carry the residual value risk: GM Financial's average leased vehicles, net, were $32.9 billion in 2025, with an estimated residual value of $25.0 billion, and Toyota Motor Credit's operating leases produced a quarter of its financing revenue.
• Dealer floorplan. Captives finance dealers' inventory (wholesale or floorplan lending): GM Financial had $17.4 billion of commercial receivables with 2,554 dealers and 48.5% US floorplan penetration, and Ford Credit's new wholesale receivables were outstanding an average of 76 days. Floorplan is commercial lending secured by the cars on the lot and paid off as each car sells; Commercial Lending covers borrowing bases.

Penetration is the captive's share of its parent's sales: GM Financial's was 33.3% of GM's US retail sales in 2025 (38.9% in 2024) and Ford Credit's 41% of Ford and Lincoln US retail sales (53% in 2024). Private-label agreements are the bank alternative to owning a captive, and they end: Santander's ten-year agreement to be Stellantis's preferred provider of consumer loans, leases and dealer loans as Chrysler Capital was terminated effective September 15, 2025.

Subprime and Buy-Here-Pay-Here#

Subprime auto lending is the same contract at a higher rate, a smaller loan-to-value tolerance and a much higher loss rate, and it's where most enforcement lands. Two structures are worth knowing:

• Credit Acceptance's programs. Under its Portfolio Program, the dealer gets an advance when it assigns a contract; contracts are pooled (pools close at 50 or 100 contracts, at the dealer's choice), and collections on each pool pay collection costs, Credit Acceptance's servicing fee (generally 20% of collections), the advance, and then the dealer, as dealer holdback. Under its Purchase Program, Credit Acceptance pays the dealer once and keeps all collections. In 2025, 74.2% of units went through the Portfolio Program, and 79.5% of units were to consumers with FICO scores below 650 or no score. The Portfolio Program shares credit risk with the dealer: the dealer's holdback is what's left after losses.
• Buy-here-pay-here. A dealer that extends credit itself and keeps the contract, rather than routinely assigning it to an unaffiliated lender, is a lender, and falls back under the CFPB's authority (the exception to section 1029 that F&I: Financing, Leases and Add-Ons describes). Its systems need everything in this chapter plus the dealer's.

Enforcement shows the risks. The CFPB and the New York Attorney General sued Credit Acceptance in the Southern District of New York in January 2023 (No. 1:23-cv-00038); the CFPB withdrew from the case in April 2025, and on September 17, 2026 New York and a multistate group of attorneys general announced a settlement of about $700 million, including more than $630 million of debt relief, $60 million of restitution for consumers whose cars were repossessed and a $15.5 million penalty, with 95% of the debt forgiven for certain at-risk borrowers who defaulted within 12 or 18 months and were repossessed. Credit Acceptance's filing describes it as without any admission of fault or wrongdoing. The allegations centered on lending without regard to ability to repay and on APRs that averaged over 38%.

Leases#

A consumer lease under Regulation M is a lease of personal property to a natural person primarily for personal, family or household purposes, for more than four months, with a total contractual obligation no greater than an annually adjusted threshold: $73,400 for 2026 (it was $71,900 for 2025) (12 CFR 1013.2(e)). An auto lease pays for the vehicle's expected depreciation over the term plus a finance charge (the rent charge), and at the end the lessee returns the car, buys it for the stated purchase option price, or owes for excess wear and mileage.

Regulation M's disclosures (1013.4) lay out the payment calculation in a fixed order, and a lease engine computes exactly those lines:

• Gross capitalized cost: the agreed value of the vehicle plus items capitalized into the lease (fees, service contracts, a prior balance).
• Capitalized cost reduction: down payment, net trade-in, rebates.
• Adjusted capitalized cost: the first minus the second.
• Residual value: the vehicle's estimated value at the end of the term.
• Depreciation and amortized amounts: adjusted capitalized cost minus residual.
• Rent charge: the finance charge for the term.
• Total of base periodic payments, number of payments, base periodic payment, other charges and total periodic payment.

Also disclosed: the amount due at signing or delivery, itemized (with how it's paid, for motor vehicle leases); the early termination warning ("You may have to pay a substantial charge if you end this lease early"); excessive wear and use standards; and liability for any difference between the residual and the realized value, with a right to an independent appraisal. A lease rate may not be called an "annual percentage rate" (1013.4(s)).

Worked numbers. A 36-month closed-end lease with a gross capitalized cost of $40,000, a $3,000 capitalized cost reduction and a residual value of $22,000, priced with a money factor (the rent charge per dollar of the capitalized cost plus residual, per month) of 0.0025:

Line	Computation	Amount
Adjusted capitalized cost	$40,000 − $3,000	$37,000.00
Depreciation and amortized amounts	$37,000 − $22,000	$15,000.00
Base depreciation per month	$15,000 / 36	$416.67
Rent charge per month	($37,000 + $22,000) × 0.0025	$147.50
Base monthly payment		$564.17
Total rent charge	$147.50 × 36	$5,310.00

Taxes and other charges are added on top, by state. The money factor method is a lessor convention, not a Regulation M requirement; what the regulation fixes is that the disclosed lines reconcile, so the engine computes the payment from those lines and the disclosure prints them.

Residual risk. The lessor owns the car at the end. If used car prices fall below the residual, the lessor loses the difference on every returned vehicle, which is why captives watch auction values (Ford Credit reports US auction values up 3% in 2025, to $31,475) and why the residual is a forecast with a model and a version behind it. Under an open-end lease, where the lessee bears the residual risk, the residual is presumed unreasonable if it exceeds the realized value by more than three times the base monthly payment, and the lessor can collect more than that only by winning a lawsuit and paying the lessee's attorney's fees (1013.4(m)(2); 15 U.S.C. 1667b(a)). Default and early termination charges must be reasonable in light of the anticipated or actual harm (15 U.S.C. 1667b(b)).

GAP and Add-On Products#

GAP (guaranteed asset protection) covers the difference between what's owed and what the car is worth if it's totaled or stolen; it's sold as insurance or as a debt cancellation waiver, usually at the dealer, priced upfront and financed into the contract with service contracts and other products (F&I: Financing, Leases and Add-Ons covers the sale and the consent). Once the lender buys the contract, the products are part of its loan, and the lender's obligations follow:

• Refunds when the product stops providing a benefit. CFPB examiners found servicers failing to obtain refunds of unearned GAP premiums from product administrators after early payoff or repossession, and failing to apply them, so deficiency balances sold to debt buyers were inflated (Supervisory Highlights, 2022). The 2024 auto finance special edition found add-ons charged without consent and no refunds of unused coverage after early payoff.
• State GAP laws. Virginia's GAP waiver statute, for example, bars conditioning credit on buying the waiver, requires disclosure of a free-look period with a full refund, the cancellation terms and the refund calculation, and allows a refund of the unearned portion with a 90-day window to request it when early termination of the finance agreement cancels the waiver (Va. Code 38.2-6403, 38.2-6404). Every state's rules go in the product's rule set.
• Enforcement. The CFPB's November 2023 order against Toyota Motor Credit ($48 million of redress and a $12 million penalty) covered making add-on cancellation hard, failing to refund unearned GAP and credit life and disability premiums, wrong service contract refunds, and reporting delinquencies on vehicles that had been returned; the order was terminated on May 12, 2025.

For the system: every add-on is a line on the contract with its administrator, price, term, cancellation rules and refund method, and a payoff, repossession, total loss or cancellation request triggers a refund claim with a deadline, tracked until the money is applied to the account or returned to the borrower.

Repossession#

A car loan's collateral can be taken back without going to court, and that makes repossession the most consequential step in auto servicing. Article 9 of the Uniform Commercial Code, as each state enacted it, sets the frame:

• Self-help, without breach of the peace. After default, the secured party may take possession without judicial process "if it proceeds without breach of the peace" (UCC 9-609). What breaches the peace is state case law; repossession agents work under the lender's rules and the lender answers for them.
• Notice before disposition. The lender must send a reasoned notice of the planned sale to the debtor and secondary obligors (9-611); for consumer goods, the notice must also explain the debtor's liability for any deficiency, give a telephone number for the amount needed to redeem, and say where to get more information, with a safe-harbor form headed "NOTICE OF OUR PLAN TO SELL PROPERTY" (9-614).
• Redemption. Until the lender sells the car (or contracts to), the debtor may redeem it by paying all secured obligations plus the lender's reasonable expenses (9-623). Some states add a right to cure (reinstatement) on shorter terms.
• A commercially reasonable sale. Every aspect of the disposition, "including the method, manner, time, place, and other terms," must be commercially reasonable (9-610), usually a wholesale auction.
• The deficiency explanation. For consumer goods, the lender must explain how it calculated any deficiency (or surplus), before or with its first written demand for the deficiency, or within 14 days of the debtor's request, in a fixed order of steps; one free response every six months (9-616).
• Servicemembers. A vehicle contract entered before military service on which a deposit or installment was paid before service can't be rescinded, terminated or repossessed for breach during service without a court order (50 U.S.C. 3952).
• Starter interrupt devices (a GPS or disabling device fitted to the car) are regulated by some states. Nevada, for example, requires a separate signed agreement, allows disabling only after a default and no sooner than 30 days after a missed due date, treats using it as constructive repossession, bars disabling a moving vehicle, and requires 48 hours' actual notice and two 24-hour emergency uses per payment cycle (NRS 598.9715).

What goes wrong. CFPB examiners found servicers repossessing cars after the borrower had made a payment, agreed to a deferral or a modification, because the repossession order sent to the vendor wasn't canceled, and repossessing without a valid recorded lien (Supervisory Highlights, 2022 and 2024). The December 2022 order against Wells Fargo included wrongful repossessions, misapplied auto payments and unrefunded GAP fees among its findings.

The engineering lesson is that a repossession is a workflow with an external party (the agent) acting on the lender's last instruction, so every event that cures or pauses the default (payment, promise to pay, deferral, modification, bankruptcy filing, a servicemember status check) has to cancel the outstanding order synchronously and get the agent's acknowledgment, and nothing may be dispatched without a confirmed, perfected lien. Collections & Recovery covers the delinquency path that leads here; Loan Servicing covers deferrals.

Electronic Contracts and Control#

An indirect contract signed electronically at the dealer moves to the lender through an eContracting platform's vault. A retail installment contract is chattel paper, and a buyer of electronic chattel paper perfects its interest by control: under UCC 9-105, a system gives control if it "reliably establishes the secured party as the person to which the chattel paper was assigned," with a safe harbor for a single authoritative copy that is unique, identifiable and unalterable except by authorized changes, identifies the secured party as assignee, and is held by it or its custodian, with every other copy marked as not authoritative. Lenders that securitize auto loans need the vault to transfer control again, to the trust.

For the system: the lender's record of a contract points at the authoritative copy in the vault and its control history (dealer to lender to securitization trust), never at a PDF it stores itself, and the funding check compares the authoritative copy's terms with the approval (Storage and Retrieval).

How to Build It#

These are deltas against The Core Data Model: an auto loan is an accounts row (account_kind = 'loan') with a loans row, collateral for the vehicle, an applications row from the dealer, credit_decisions per lender quote, and the schedule and payment tables from Personal & Installment Loans. The Commerce volume models the dealer's side of the same transaction; the records map one to one: Commerce's vehicles (the VIN) to this book's collateral, its deals to indirect_contracts, its deal_fi_products to contract_products, and its title_registrations to lien_records.

CREATE TABLE dealers (
  id                  UUID PRIMARY KEY DEFAULT uuidv7(),
  party_id            UUID NOT NULL REFERENCES parties (id),     -- the dealer as a business party
  dealer_license      TEXT NOT NULL,
  license_state       CHAR(2) NOT NULL,
  franchise_brands    TEXT[],
  status              TEXT NOT NULL CHECK (status IN ('onboarding', 'active', 'restricted', 'terminated'))
);

CREATE TABLE dealer_agreements (             -- versioned: compensation, caps, chargebacks
  id                   UUID PRIMARY KEY DEFAULT uuidv7(),
  dealer_id            UUID NOT NULL REFERENCES dealers (id),
  version              INT NOT NULL,
  compensation         TEXT NOT NULL CHECK (compensation IN ('rate_participation', 'flat_fee', 'none')),
  max_markup_bps_short INT,                   -- terms up to the cutoff
  max_markup_bps_long  INT,
  markup_term_cutoff_months SMALLINT,
  participation_share_bps INT,                -- the dealer's share of the markup's finance charge
  flat_fee             BIGINT,
  chargeback_days      SMALLINT,              -- early payoff or default inside this window claws back reserve
  effective_from       DATE NOT NULL,
  effective_to         DATE,
  UNIQUE (dealer_id, version)
);

CREATE TABLE indirect_contracts (            -- the RIC as written by the dealer and bought by the lender
  account_id           UUID PRIMARY KEY REFERENCES accounts (id),
  dealer_id            UUID NOT NULL REFERENCES dealers (id),
  agreement_id         UUID NOT NULL REFERENCES dealer_agreements (id),
  credit_decision_id   UUID NOT NULL REFERENCES credit_decisions (id),   -- the approval it was funded against
  buy_rate_bps         INT NOT NULL,
  contract_rate_bps    INT NOT NULL,
  markup_bps           INT GENERATED ALWAYS AS (contract_rate_bps - buy_rate_bps) STORED,
  dealer_reserve       BIGINT NOT NULL DEFAULT 0,
  subvention_amount    BIGINT NOT NULL DEFAULT 0,  -- captive: paid by the manufacturer, recognized over the life
  cash_price           BIGINT NOT NULL,
  down_payment         BIGINT NOT NULL,
  net_trade_in         BIGINT NOT NULL,            -- negative for negative equity
  amount_financed      BIGINT NOT NULL,
  ltv_bps              INT NOT NULL,
  holder_notice_present BOOLEAN NOT NULL,          -- 16 CFR 433.2
  econtract_vault_ref  TEXT,                       -- the authoritative copy
  control_holder       TEXT NOT NULL,              -- 'dealer', 'lender', or a trust, by reference
  funding_status       TEXT NOT NULL CHECK (funding_status IN ('received', 'stipulations_pending',
                         'funded', 'rejected', 'unwound')),
  funded_at            TIMESTAMPTZ,
  CHECK (markup_bps >= 0)
);

CREATE TABLE contract_products (             -- GAP, service contracts and other add-ons on the loan
  id                   UUID PRIMARY KEY DEFAULT uuidv7(),
  account_id           UUID NOT NULL REFERENCES accounts (id),
  kind                 TEXT NOT NULL CHECK (kind IN ('gap', 'service_contract', 'credit_life',
                         'credit_disability', 'maintenance', 'other')),
  administrator        TEXT NOT NULL,
  price                BIGINT NOT NULL,
  term_months          SMALLINT NOT NULL,
  refund_method        TEXT NOT NULL,              -- pro rata, rule of 78s, per the product and state
  consent_ref          TEXT NOT NULL,              -- the signed election, from the deal
  status               TEXT NOT NULL CHECK (status IN ('active', 'cancel_requested', 'cancelled',
                         'claimed', 'expired'))
);

CREATE TABLE product_refunds (               -- every refund owed, until applied or paid
  id                   UUID PRIMARY KEY DEFAULT uuidv7(),
  contract_product_id  UUID NOT NULL REFERENCES contract_products (id),
  trigger              TEXT NOT NULL CHECK (trigger IN ('payoff', 'repossession', 'total_loss',
                         'cancellation', 'free_look')),
  triggered_at         TIMESTAMPTZ NOT NULL,
  due_by               DATE NOT NULL,              -- from the state rule and the product terms
  amount_expected      BIGINT,
  requested_from_administrator_at TIMESTAMPTZ,
  received_at          TIMESTAMPTZ,
  applied_journal_entry_id UUID REFERENCES journal_entries (id),   -- to the balance, or paid out
  status               TEXT NOT NULL CHECK (status IN ('owed', 'requested', 'received', 'applied', 'paid'))
);

CREATE TABLE leases (                        -- Regulation M terms on a lease account
  account_id               UUID PRIMARY KEY REFERENCES accounts (id),
  lease_type               TEXT NOT NULL CHECK (lease_type IN ('closed_end', 'open_end')),
  gross_cap_cost           BIGINT NOT NULL,
  cap_cost_reduction       BIGINT NOT NULL,
  adjusted_cap_cost        BIGINT GENERATED ALWAYS AS (gross_cap_cost - cap_cost_reduction) STORED,
  residual_value           BIGINT NOT NULL,
  residual_model_version   TEXT NOT NULL,
  money_factor_micros      INT NOT NULL,          -- 0.0025 stored as 2500
  base_payment             BIGINT NOT NULL,
  term_months              SMALLINT NOT NULL,
  purchase_option_price    BIGINT,
  mileage_allowance_per_year INT,
  excess_mileage_rate      BIGINT,
  total_obligation         BIGINT NOT NULL,       -- tested against the Regulation M threshold for its year
  disclosure_id            UUID NOT NULL REFERENCES disclosures (id),
  ended_at                 TIMESTAMPTZ,
  end_reason               TEXT CHECK (end_reason IN ('returned', 'purchased', 'early_termination',
                             'default', 'total_loss')),
  realized_value           BIGINT
);

CREATE TABLE lien_records (
  id                   UUID PRIMARY KEY DEFAULT uuidv7(),
  collateral_id        UUID NOT NULL REFERENCES collateral (id),
  title_state          CHAR(2) NOT NULL,
  method               TEXT NOT NULL CHECK (method IN ('elt', 'paper')),
  status               TEXT NOT NULL CHECK (status IN ('pending', 'perfected', 'release_requested', 'released')),
  perfected_at         TIMESTAMPTZ,
  released_at          TIMESTAMPTZ
);

CREATE TABLE repossessions (
  id                   UUID PRIMARY KEY DEFAULT uuidv7(),
  account_id           UUID NOT NULL REFERENCES accounts (id),
  lien_record_id       UUID NOT NULL REFERENCES lien_records (id),
  scra_checked_at      TIMESTAMPTZ NOT NULL,      -- servicemember status before any order
  ordered_at           TIMESTAMPTZ NOT NULL,
  agent                TEXT NOT NULL,
  cancel_requested_at  TIMESTAMPTZ,
  cancel_acknowledged_at TIMESTAMPTZ,            -- by the agent
  recovered_at         TIMESTAMPTZ,
  disposition_notice_id UUID REFERENCES disclosures (id),   -- UCC 9-611 / 9-614
  redemption_deadline  TIMESTAMPTZ,
  redeemed_at          TIMESTAMPTZ,
  sold_at              TIMESTAMPTZ,
  sale_venue           TEXT,
  sale_proceeds        BIGINT,
  deficiency_amount    BIGINT,
  deficiency_explanation_id UUID REFERENCES disclosures (id), -- UCC 9-616
  status               TEXT NOT NULL CHECK (status IN ('ordered', 'cancelled', 'recovered', 'redeemed',
                         'sold', 'closed'))
);

Funding is a gate: an indirect_contracts row moves to funded only when the contract's terms match the decision it cites (amount, term, rate within the agreement's markup cap, products within the approval's limits), the Holder notice is present, the authoritative copy is in the vault under the lender's control, and the lien is pending or perfected. Reserve and subvention post as their own journal entries and are recognized over the contract's life, so a payoff inside chargeback_days reverses the right amount. Every cure event (payment, deferral, modification, bankruptcy flag, servicemember status) runs a check against open repossessions in the same transaction and requests cancellation; a scheduled job escalates any request the agent hasn't acknowledged (Deadlines Are Computed and Stored). product_refunds rows are created by the payoff, repossession and total loss events themselves, so no product can end without a refund obligation on record. A lease's payment is computed from its stored lines, and its total_obligation is tested against the threshold for the year of consummation, kept as reference data.

Auditing#

Auto lending is examined for pricing, add-ons and repossession, and the general design is in Audit Trails. Make sure the record shows:

• Every dealer submission and every lender decision, with the buy rate quoted and the conditions.
• The contract as funded against the approval: the comparison, any exceptions and who approved them.
• Buy rate, contract rate, markup and reserve per contract, with the dealer agreement version, monitored by dealer.
• Every add-on with its consent, and every refund trigger with its due date, request, receipt and application.
• Lien perfection before any repossession, and the servicemember check.
• Every repossession order and every cancellation, with the agent's acknowledgment and the event that triggered it.
• Disposition notices, redemption amounts, the sale and the deficiency explanation, as sent.
• Lease disclosures and residual model versions, and the realized value and charges at lease end.
• Control of the authoritative copy over time, through every assignment.

What This Means for the System You Build#

• Treat the dealer as the applicant's channel and the contract's author: check every funded contract against the approval it cites.
• Store buy rate, contract rate and reserve on every contract, and enforce markup caps at funding.
• Record subvention and reserve as income with schedules, so payoffs and chargebacks reverse correctly.
• Model leases from Regulation M's lines, with the residual as a versioned forecast.
• Make every add-on a line with its refund rules, and create refund obligations from the events that end them.
• Cancel repossession orders synchronously on any cure, and dispatch nothing without a perfected lien and a servicemember check.
• Run Article 9's notices and deficiency explanations as documents with clocks, per state.
• Point at the authoritative eContract and its control chain, never a copy.

References#

Law and regulation

• CFPB: Regulation M § 1013.2, definitions, the consumer lease definition, the $73,400 threshold for 2026 and $71,900 for 2025, capitalized cost, residual value and realized value
• CFPB: Regulation M § 1013.4, content of disclosures, the amount due at signing, the payment calculation lines, the early termination warning, wear and use, residual liability and appraisal, the three-payment presumption for open-end leases, and the bar on calling a lease rate an APR
• Cornell LII: 15 U.S.C. § 1667b, lessee's liability on expiration or termination of lease, the reasonable residual, the three-payment presumption, attorney's fees, and reasonable default and termination charges
• CFPB: Regulation Z § 1026.18, content of disclosures, closed-end disclosures including the total sale price for credit sales
• Cornell LII: 16 CFR 433.2, preservation of consumers' claims and defenses, the Holder Rule notice and its type size
• Cornell LII: 12 CFR 1090.108, automobile financing larger participants, the 10,000 aggregate annual originations test, what counts, affiliate aggregation and the dealer exclusion
• Cornell LII: UCC 9-609, secured party's right to take possession after default, self-help without breach of the peace
• Cornell LII: UCC 9-610, disposition of collateral after default, commercial reasonableness of every aspect of the disposition
• Cornell LII: UCC 9-611, notification before disposition of collateral, who must be notified and the exceptions
• Cornell LII: UCC 9-614, contents and form of notification in consumer-goods transactions, deficiency liability, the redemption telephone number and the safe-harbor form
• Cornell LII: UCC 9-616, explanation of calculation of surplus or deficiency, timing, the 14-day response and the ordered calculation
• Cornell LII: UCC 9-623, right to redeem collateral, who may redeem, the tender required and when the right ends
• Cornell LII: UCC 9-105, control of electronic chattel paper, control and the single authoritative copy safe harbor
• Cornell LII: 50 U.S.C. § 3952, protection under installment contracts, no repossession of a pre-service contract during service without a court order
• Virginia Code § 38.2-6403, GAP waiver disclosures, no conditioning credit on the waiver, the free-look and cancellation disclosures
• Virginia Code § 38.2-6404, cancellation and refunds, refunds of the unearned portion and the 90-day request window
• Nevada Revised Statutes chapter 598 (NRS 598.9715), starter interrupt devices: separate agreement, 30 days after a missed payment, constructive repossession, notice and emergency uses
• GovInfo: Public Law 115-172 (May 21, 2018), disapproval of CFPB Bulletin 2013-02 on indirect auto lending

Regulators and guidance

• CFPB: CFPB and DOJ order Ally to pay $80 million to consumers harmed by discriminatory auto loan pricing, buy rate, markup and reserve, the $80 million and $18 million, more than 235,000 borrowers, and the note on the 2018 disapproval
• CFPB: CFPB and DOJ reach resolution with Honda to address discriminatory auto loan pricing (July 14, 2015), $24 million, the 1.25 and 1 point caps and non-discretionary compensation
• CFPB: Toyota Motor Credit Corporation (2023), add-on cancellation and refunds, $48 million redress and $12 million penalty, terminated May 12, 2025
• CFPB: Wells Fargo Bank, N.A. (2022), auto findings including misapplied payments, wrongful repossessions and unrefunded GAP fees
• CFPB: Credit Acceptance Corporation, the January 2023 suit with New York (1:23-cv-00038) and the CFPB's April 2025 withdrawal
• CFPB: Supervisory report finds unlawful auto repossessions and breakdowns in credit report disputes (May 2, 2022), unrefunded add-ons and repossessions after borrowers acted to prevent them
• CFPB: Overcharging for add-on products on auto loans (May 2, 2022), what GAP covers, unrefunded GAP after payoff or repossession and inflated deficiencies
• CFPB: CFPB takes action against wrongful auto repossessions and loan servicing breakdowns (October 7, 2024), the auto finance special edition: uncanceled repossession orders, repossession without a valid lien, add-ons without consent and no refunds after payoff
• FTC: Advisory opinion on the Holder Rule and attorneys' fees (January 20, 2022), state law may award costs and fees against holders
• New York Attorney General: $700 million settlement with Credit Acceptance (September 17, 2026), debt relief, restitution, the penalty, the 95% forgiveness terms and the alleged average APR

Regulators and data

• Federal Reserve Bank of New York: Household Debt and Credit, Q2 2026 (August 11, 2026), auto balances of $1.713 trillion, $211 billion of new auto loans and the 3.00% flow into serious delinquency
• Federal Reserve: G.19 Consumer Credit (October 7, 2026), bank new car rates and finance company rate, maturity and amount financed

Filings

• Ally Financial: Fourth quarter 2025 earnings release (Form 8-K exhibit), 15.5 million applications, $43.7 billion of originations, 62% used, 9.74% originated yield, 43% highest tier, 2.14% 4Q25 net charge-offs, $94.3 billion of consumer auto earning assets and $4.4 billion of lease originations
• Capital One: Monthly credit metrics for December 2025 (Form 8-K exhibit), auto loans, net charge-offs and delinquency
• General Motors Financial Company: Annual report on Form 10-K for 2025, captive status, penetration, originations, receivables, leased vehicles and residuals, credit mix, net charge-offs, floorplan and subvention
• Ford Motor Credit: Annual report on Form 10-K for 2025, share of Ford and Lincoln retail sales, placements, receivables, loss ratio, auction values, original terms, wholesale days and support payments
• Toyota Motor Credit: Annual report on Form 10-K for fiscal 2026, revenue mix, subvention and operating lease revenue
• Santander Holdings USA: Annual report on Form 10-K for 2025, the Stellantis agreement and its termination effective September 15, 2025, and the application to merge Santander Consumer into the bank
• Credit Acceptance: Annual report on Form 10-K for 2025, the Portfolio and Purchase programs, pools, the servicing fee, dealer holdback, program mix, active dealers, assignments and credit scores
• Credit Acceptance: Form 8-K on the multistate settlement (September 17, 2026), the consumer relief fund and penalty, without admission of wrongdoing
• CarMax: Annual report on Form 10-K for fiscal 2026, CarMax Auto Finance's share of retail units and portfolio, and fixed fees per contract with third-party lenders