certificate for automobile receivables
Certificate of Automobile Receivables
A derivative whose value is derived from the receivables on a car loan. This entitles the owner to a claim on the principal and interest payments on the particular car loans underpinning the security. The equivalent of the coupon on CARS is a percentage of the interest and principal paid on car loans. An obvious risk associated with CARS is the possibility that a substantial number of loans will default. See also: Credit risk, Mortgage-backed security.
certificate for automobile receivables (CARS)
A short-term debt security backed by automobile loans and originating when lenders package and resell the automobile loans to the public. CARS provide lenders with more funds to use in additional lending and provide investors with relatively safe securities that pay short-term interest rates slightly above Treasury securities of similar maturity.