Deal Pack Blog

What is a Collateral Exchange?

posted on: July-02-2014
by: Scott Hackett
category: BHPH Dealership

In a Buy Here Pay Here Dealership a collateral exchange is a transaction that takes place quite often. A collateral exchange refers to one vehicle being substituted for another vehicle for a customer. In most states, this agreement does not change any other aspect of the original Retail Installment Contract. Also, any payment history on the previous vehicle remains the same. It is simply a ‘swap’ in vehicles, or ‘collateral’.


So what kind of scenario would generate a collateral exchange? As a dealer, you will always have your problem cars that customers will continue to bring back after the sale due to mechanical errors. At some point in time, it may be better for you to switch out that collateral for the customer. Not only does this save you the hassle, but it could also save you money in the long run. A collateral exchange is just one of many types of transactions that a BHPH dealer may be faced with. It is important to be sure that your Dealer Management Software is able to handle these arrangements. Should you have any questions on how Deal Pack Pro processes a collateral exchange, call our Support Team @ 800-526-5832.

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