Vehicle Financing Method with Phased Payment Structure

Solution Overview

Problem

Vehicle leasing arrangements often result in residual loss for leasing companies, and existing financing methods for vehicle ownership do not effectively offer low monthly payments while promoting trade-in and purchase of new vehicles.

Innovation Solution

A financing method using a retail installment contract or loan with a structured repayment schedule featuring lower initial payments that increase at a decision point, encouraging trade-in and purchase of a new vehicle, while minimizing residual loss and promotional costs.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Ease of operation

If a typical vehicle leasing arrangement is used, then low monthly payments are achieved, but the leasing company absorbs residual loss when the vehicle's market value is less than the residual value option

Engineering Contradiction:

Improvemonthly payment levelVSAvoidresidual loss

Core Design Contradiction:

Ease of operationVSLoss of energy

Solution Approach 1:

The financing contract is divided into two distinct phases: an initial period with reduced payments and a subsequent period with regular payments. This segmentation allows the customer to experience low monthly payments during the first phase while the finance company retains ownership and avoids residual loss in the second phase when the vehicle is returned or redeemed.

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

The payment structure is made dynamic by introducing a decision point where payment terms change. The contract transitions from an initial phase with lower payments to a second phase with regular payments, allowing flexibility in customer choices while maintaining finance company ownership and eliminating residual loss exposure.

Inventive Principle:

Principle #15Dynamics

2Loss of energy

If a typical vehicle ownership plan with a finance company is used, then residual loss is avoided, but monthly payments are substantially higher than leasing

Engineering Contradiction:

Improveresidual lossVSAvoidmonthly payment level

Core Design Contradiction:

Loss of energyVSEase of operation

Solution Approach 1:

The financing contract is divided into two distinct phases: an initial period with reduced payments and a subsequent period with regular payments. This segmentation allows the customer to experience low monthly payments during the first phase while the finance company retains ownership and avoids residual loss in the second phase when the vehicle is returned or redeemed.

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

The payment parameters are changed dynamically based on the contract phase. During the initial phase, payments are reduced to attract customers and encourage vehicle purchases. After the decision point, payments return to regular levels, creating a gradient that motivates customers to trade in their vehicles while maintaining finance company ownership.

Inventive Principle:

Principle #35Parameter changes

3Ease of operation

If a progressive payment plan is used to offer low initial payments and ownership, then customer loyalty is enhanced, but trade cycle management is not addressed

Engineering Contradiction:

Improveinitial payment levelVSAvoidtrade cycle management

Core Design Contradiction:

Ease of operationVSProductivity

Solution Approach 1:

The contract structure is designed in advance with a decision point built into the payment schedule. By pre-establishing the transition from reduced to regular payments at a specific timeframe, the finance company creates a natural catalyst for customers to trade in their vehicles, thereby addressing trade cycle management while maintaining low initial payments.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The payment structure is made dynamic by introducing a decision point where payment terms change. The contract transitions from an initial phase with lower payments to a second phase with regular payments, allowing flexibility in customer choices while maintaining finance company ownership and eliminating residual loss exposure.

Inventive Principle:

Principle #15Dynamics

Data Source

PatentUS7555443B2Method for financing ownership of a vehicle

Publication Date: 2009.06.30 FORD MOTOR CO

AI summary

The present invention relates to a method for financing ownership of a vehicle by a customer. A preferred method of the present invention includes financing the purchase of a vehicle with a RIC or loan. The RIC or loan is preferably repaid with a set of first payments followed by a set of second payments. The first payments preferably last until a decision point and are about 10 percent to about 40 percent lower than the second payments. The preferred method embodiment includes contacting the customer prior to the decision point to promote trade-in of the vehicle and a new vehicle purchase.