Question

Jasdeep purchased a new car worth 9 lakhs and paid 1 lakh to the car dealer. She asked him to accessorize it with an enhanced music system and velvet seat covers. The car dealer told Jasdeep to pay the remaining amount after customisation.

Identify the short-term source of capital used by the car dealer.

Answer 1

In this instance, the car dealer is giving Jasdeep the choice to pay the remaining sum once the vehicle has been customised. This means that the auto dealer is financing the customisation with a type of credit. The vehicle dealer in this situation most commonly uses trade credit as a short-term form of funding, allowing the buyer to pay a portion up front and the full amount after a predetermined amount of time (in this case, once the car is customised).