Why does it take a few hours to finance a $100k auto loan, but 30+ days to finance a $100k mortgage?
In: Economics
In addition to what /u/Lithium and /u/Vikkunen have said, cars are different from houses because they’re way easier to value, especially new cars. While there will always be a little variation, two cars of the same make/model/year in similar condition will sell for similar amounts, even in different markets, and their change in value over time is pretty predictable. So when the bank decides to finance the car, they can predict the value they can get out of it if the buyer can’t pay off the loan.
The value of a house is a lot more variable. Similar houses in the same neighborhood could vary by tens of thousands of dollars depending on even small variations in condition, amenities, and so on. Similar houses across the street from each other can vary by even more if that street is the dividing line between towns or school districts. Location makes a huge difference in house value. A basic sedan will cost you roughly $20k anywhere in the country, but a house comparable to [this one](https://www.realtor.com/realestateandhomes-detail/5775-Zaffre-Ridge-St_Boise_ID_83716_M98930-86944?view=qv) in Boise would easily cost seven or even eight figures in the Bay Area. And the change over time isn’t as easily predicted either-interest rates, the economy in general, and the growth or shrinking of individual towns all have an impact. All that makes it hard to just slap a value on a house, so a big part of the mortgage financing process is the appraisal. Someone from the bank will look at the house, at other similar houses nearby that have sold recently, and analyze the market to see if the value of the house is reasonable-you don’t have to do that for a car.
Finally, its a lot easier to move a car than a house. If somebody doesn’t pay their loan, the bank repossess the car. It probably gets towed to a lot, transported to an auction house, and sold, easy peasy. A house can sit on the market for weeks before getting an offer, during which time the bank has to pay for basic maintenance, taxes, at least some basic utilities (gotta keep the heat on or pipes might burst!) and so on. Even if there’s an offer immediately, the home selling process costs a lot more time and money than auctioning a car.
So in short, even if the loans are for similar amounts, a house is a lot harder to value and to move, so the bank does a little more diligence to make sure they’re going to make their money off the deal.
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