1. Loan Origination Setup Guide
  2. Product
  3. Subvention

4.22 Subvention

The Subvention Setup screen’s loan Subvention tab allows you to set up loan subvention plans for producers (groups or individuals). Multiple producers may contribute to one subvention plan or a plan can be set for a specific producer.

Subvention Types

Subvention can be offered in many forms for vehicle loans. The most common format is the rate subvention for vehicle loans. Rate subvention involves sharing the finance charge (interest) by the participant (most frequently with the manufacturer). The finance company sets its buy rate (the minimum cost to the company to extend the loans to a customer). If the customer rate is less than this buy rate, then the amount is equivalent to the interest amount for the difference (the buy rate minus the customer rate) is paid by the participant as the subvention amount.

Currently Oracle Financial Services Lending and Leasing supports the following subvention types:

Loan subvention types:
  • Rate
  • Cash bonus
  • Buy down

Subvention plans can be defined for one participant (for example, a manufacturer or a particular dealer) or group of participants (such as a dealer association). One subvention plan could have multiple sub plans and multiple participants could participate to each sub plan.

Example

Subvention plan:
  • “Summer Special Event”

    Subvention sub-plans for above plan:

  • 1.9% for 36 months

    -or-

  • 2.99% for 48 months

    -or-

  • 3.99% for 60 months

    -or-

  • $1500.00 cash bonus

Multiple participants may participate in each sub plan. For example, for the 1.9% rate, 1% might be shared by the manufacturer and 0.9% might be shared by the dealer. Similarly, for the $1,500 cash bonus, $1,000 might be shared by the manufacturer and $500 by the dealer. Or, the complete $1,500 might be covered by the manufacturer.

Collection of subvention amounts can be set for each participant in the subvention plan with the Collection Method.

Oracle Financial Services Lending and Leasing supports following collection methods:

Table 4-60 Collection Method

Type Details
UPFRONT The entire subvention amount is collected at the booking of the Loan from the producer proceed.
UPFRONT STATEMENT The entire subvention amount is collected at the time of the subvention statement.
PAY AS U GO The subvention amount is billed to the producer when the customer pays the Loan payment. The producer is due for the amount at each statement.

Subvention Refund

There are times when a Loan is either paid-off early or gets charged off and the finance company refunds the unearned subvention amount back to the producer. The refund is available only when the subvention amount is collected from the producer proceeds (UPFRONT) or the whole amount is billed in the first statement (UPFRONT STATEMENT).

You can set up the system to allow refunds only for a certain period and not beyond that. The period can be set differently for charge offs and paid offs and can be based on two methods:
  1. Days
  2. Term
The system provides the following methods for refund amount calculation:
  1. Earned
  2. Percentage

The earned method is used to refund the unearned portion of the collected subvention amount. The percentage method is used to refund a certain percentage of the subvention amount collected.

This section consists of the following topic:

Parent topic: Product