Assignment
An assignment refers to the legal transfer of rights or interests from one party to another. A contract is an assignment when one party (the assignor) transfers their rights, benefits, or obligations to another party (the assignee). The new party then assumes those responsibilities or benefits outlined in the original agreement.
An assignment is a common legal mechanism in business, real estate, and finance. It allows contracts, ownership rights, or financial agreements to change hands without requiring drafting an entirely new agreement.
Assignment in Automotive Sales & Financing
In the automotive dealership, “assignment” refers to transferring a vehicle loan or financing agreement from the dealership to a third-party lender, such as a bank, credit union, or captive finance company.
Here’s how it typically works:
- A customer visits a dealership and agrees to purchase a vehicle using financing offered at the dealership.
- The dealership originates the retail installment sales contract (loan agreement) with the buyer.
- Shortly after the sale is finalized, the dealership assigns that loan to a lender, transferring all rights to receive future payments.
- The lender becomes the assignee, and the customer makes loan payments directly to that financial institution.
This process allows dealerships to offer on-the-spot financing without servicing the loan long-term. It also gives the lender the legal right to collect payments, assess interest, and manage the loan terms moving forward.
Types of Assignments
- Retail Installment Contract Assignment: This is the most common form, in which the dealership sells the loan contract to a third-party financial institution. The dealership gets paid upfront, and the lender takes over servicing the loan.
- Lease Assignment: In leasing scenarios, a customer may transfer (assign) their lease agreement to another individual. This allows the new person to take over the remaining lease term and payments, subject to approval by the leasing company.
- Title Assignment: When a vehicle is sold, the current owner must assign the title to the new buyer. The dealership typically handles this paperwork in dealership sales. In private-party sales, the seller must complete the title assignment section on the certificate of title.
Why Assignment Matters?
- For Customers: Assignment doesn’t change the terms of your agreement, but it does mean you’ll be dealing with a new party (usually a lender) for payment, service questions, and loan management.
- For Dealerships: Assignment allows dealerships to provide immediate financing options and then free up cash flow by selling the loan contract to a financial institution.
- For Lenders: Assignment is how banks, credit unions, and financing companies acquire new auto loans from dealership partners.
Important Notes for Buyers
- Your financing may appear to be “through the dealership,” but it’s assigned to a lender soon after the sale.
- Always review your loan documents to know who the assignee is, where to send payments, and who to contact with questions.
If your loan is assigned, your rights and terms stay the same, but the servicing and point of contact may change.