When your credit score is rather poor, you may find that no bank is willing to be your lender. In that case, ‘buy here pay here’ car lots could be your last resort to buy a car.
There are very few people, who can afford to buy a car with cash, and, unfortunately, loans are hard to find if you have a bad credit because of spotty or blank credit history. If that’s the case, you may only count on ‘buy here pay here’ (BHPH) dealerships.
What Is ‘Buy Here Pay Here’ Actually?
‘Buy Here Pay Here’ means you apply for the loan at the same dealership where you want to purchase a new or used car avoiding third-party financial institutions. In other words, you buy a car from the company which is a dealership and a lender at the same time. The very nature of such companies implies that the approval is nearly always guaranteed if you have a steady income around $1,500-$1,800. Of course, they accept it not because they are good-hearted; they will cover risks with a double-digit interest rate, a longer loan term, and a limited grace period. Also, some of them accept payment in person only, which means physically bringing your payment to the dealership.
Is it Safe?
Well, it should be. Just remember to check the dealer’s reputation and all the papers you are signing on. And, of course, consider other options first. Also, it is recommended to buy a car with a warranty, otherwise, you may become a victim of scams. If you’re willing to buy a used car, don’t forget to check its title and history (there are services like CARFAX for that purpose) and be ready to meet slightly higher interest rate.
2014 Chevrolet Impala. BHPH dealerships often sell past years’ models. © General Motors
Disadvantages of ‘Buy Here Pay Here’ Car Lots
The bad news for a customer is that he or she cannot choose the car before the financial matter is settled. BHPH dealerships qualify the customer before determining how much they are willing to lend. They will show which cars are available for purchase based on that value, and the choice is likely to be limited.
Due to circumstances around the ‘buy here pay here’ car lots, the grace period between missing payment and the car’s repossession is very short, if not absent at all. You should be absolutely sure in your paying capabilities if you don’t want to end up without the car and the money you’ve already paid.
Benefits of ‘Buy Here Pay Here’ Car Lots
Apart from getting the car, you will noticeably improve your credit score. Unfortunately, some dealerships don’t report payment history to the credit bureau, so it is advisable to inquire about the credit improvement before the deal is done.
Another benefit is that BHPH dealerships frequently take in old vehicles in order to reduce the down payment of a new car, making it a lot easier for your budget to handle the financial burden.
