Complete-[$1000] #4 | Auto Loan Financing

[Eric.B]

Price: $1000 (5-days)

Description: Auto companies make a good amount of money financing their vehicles. There is also some risk when there are economic downturns and loan defaults.

This system will add an additional panel to the banking window starting around the end of WW1. (Administrative skill determines when you unlock the auto loan system, sometime between 1910 to 1935.) The auto financing panel will give players three sliders and a list of marques. The first slider is the median creditworthiness of financing buyers, the second is the median loan interest margin above the global loan rate. And the final one is median term loan length. Each marque has its own financing values.

Internally, the game will bucket sales into three categories. Paid upfront, current financing, and delinquent financing.

Sales that go into the "current financing" bucket will amount to more than the revenues from the sale to account for interest. However, only a fraction of this money will trickle into your accounts over time. Additionally, some of that money will flow into the delinquent bucket. You receive less money from this bucket, as vehicles are repossessed and sold as used, and you lose all debt payments to consumer bankruptcy. 

The number of delinquencies is determined by the global and local economic situations and your selection of auto loan sliders. 

The game is unlikely to store what vehicles are financed, the current number of vehicles financed, the interest rates, the number of loans, etc. This might be too much data for the game and would slow turn-times significantly. Instead, we will only store the monetary values owed in total. There is a small chance we can store the monetary values owed for each individual model. But keeping track of individual vehicles, the remaining loan term, and how much is owed will not happen.

This system would be an optional game setting.

Requirements: None

Required By: None

Concerns: This system might be overly complex and out of scope. The income buckets might be hard for some users to understand, especially for players who never interacted with auto-loans or have different systems. Because we can't do all the data, it isn't as detailed as the real-life systems. Players might find it too gamey, and it might bring in too many revenues. 

The bucket system might not work as well in practice as designed. Turn times might be harmed, and users might become confused about where income is coming from or why they aren't getting revenues from each sale. Some players will demand detailed data for each individual vehicle.

Eric's Opinion: Financing is an important part of the automotive industry and has been around since the start. However, some users might find this too complex, while others will find the system too simple. It opens the door to more revenue streams, while the game probably has too many revenues. This system does provide a possibility of more pain during economic recessions and downturns (a good thing). And it gives the player more options to try to boost sales. Take a risk financing non-worthy buyers to get more sales or be strict on borrowing requirements at the risk of losing sales. Estimated bounty time is higher than expected, as I think the system might not work very well in practice. If this is the case, the system will need refinement or scrapped for alternate bounties.

Links: Contribute!

https://www.nada.org/WorkArea/DownloadAs...1474839119
https://www.encyclopedia.com/finance/enc...s/car-loan

[Eric.B]

Completed!

[JC_Denton]

I think I may have found a leak in the modeling for this. I turned on financing for a couple of my marques in the mid 1930s, and then WWII happened (surprise!), stopping car sales. I turned financing off during the war, and post-war had no need for it as my factories where entirely whelmed with pent-up demand for cars, might as well take the revenue now since we can't meet demand anyway.

It's 1960 now, and the customer loan balance is still above zero. It seems that I've been getting about 2% of the funds (with my 48 or 50 month terms) ever since, so while the balance has shrunk a lot, it's still non-zero.

I would have expected this would behave more like the pension system, where each year (month in the financing case) has a timeline, siphoning (contributing) funds each year/month until it's fully addressed and falls off the books. So like with my 48-month loans, theoretically after 48 months it would either all have been paid, paid off early, or defaulted. Simplified, I realize there are deferments and so forth, so maybe it takes an extra year or two, but I shouldn't still have an outstanding balance 18 years after the last loan was issued, it should be written off by then.

Not a big deal for me, I have enough revenues already and am happy to take the money upfront and let outside banks finance it (I also wasn't one of the voters for this bounty). And if someone leaves financing on, which seems likely, they're unlikely to notice this Thought it worth noting though; given enough budget, I'd probably vote for a refinement of the system before the end of 2nd Gear.

(I suppose the other thing to test is, if I set financing to 60 months initially, and then change it to 12 months later, do I start getting 1/12th of the balance per month instead of 1/60th? In theory, that shouldn't affect existing loans)

[Eric.B]

I'll add it to the list of things to check out when I get back to working on GC.

Really, I probably should prevent you from disabling financing, since companies really haven't done that to my knowledge. But we'll see.

(I suppose the other thing to test is, if I set financing to 60 months initially, and then change it to 12 months later, do I start getting 1/12th of the balance per month instead of 1/60th? In theory, that shouldn't affect existing loans)

That shouldn't be possible, but be my guest to check. Saves me time.

[JC_Denton]

That shouldn't be possible, but be my guest to check. Saves me time.

You are correct, it stays at the same rate (tested with my 1944 war save).

I think this probably would all fly under the radar of noticeability without the ability to disable financing once it was turned on. Half of how I noticed was being curious how things worked and turning all the knobs and doing some math to make sure my money was still going to show up eventually.

[Eric.B]

I think I may have found a leak in the modeling for this. I turned on financing for a couple of my marques in the mid 1930s, and then WWII happened (surprise!), stopping car sales. I turned financing off during the war, and post-war had no need for it as my factories where entirely whelmed with pent-up demand for cars, might as well take the revenue now since we can't meet demand anyway.

It's 1960 now, and the customer loan balance is still above zero. It seems that I've been getting about 2% of the funds (with my 48 or 50 month terms) ever since, so while the balance has shrunk a lot, it's still non-zero.

I would have expected this would behave more like the pension system, where each year (month in the financing case) has a timeline, siphoning (contributing) funds each year/month until it's fully addressed and falls off the books. So like with my 48-month loans, theoretically after 48 months it would either all have been paid, paid off early, or defaulted. Simplified, I realize there are deferments and so forth, so maybe it takes an extra year or two, but I shouldn't still have an outstanding balance 18 years after the last loan was issued, it should be written off by then.

Not a big deal for me, I have enough revenues already and am happy to take the money upfront and let outside banks finance it (I also wasn't one of the voters for this bounty). And if someone leaves financing on, which seems likely, they're unlikely to notice this Thought it worth noting though; given enough budget, I'd probably vote for a refinement of the system before the end of 2nd Gear.

(I suppose the other thing to test is, if I set financing to 60 months initially, and then change it to 12 months later, do I start getting 1/12th of the balance per month instead of 1/60th? In theory, that shouldn't affect existing loans)

Issue is fixed, and it'll be in the next update. Thanks again!