What is a Buy Here Pay Here Auto Dealer

What You Need to Know About Buy Here Pay Here Dealerships

Buy here pay here dealerships have been popular since the economic recession. That’s when a lot of consumers acquired poor credit standing.

The no-credit check and in-house financing offers of these dealerships then have been attractive to people with damaged credit.

But can these lots really help you?

How Do BHPH Dealers Differ from Traditional Dealerships?

Buy here pay here dealerships do not need to communicate with other lenders to arrange financing for you. They themselves give you financing. They are the bank.

They also don’t need to see your credit report to put you into a loan. You have to, however, give them the assurance that you’ll be able to pay back on time. Some of the requirements you’ll have to provide are a down payment, proofs of income and employment, and driver’s license.

With that, buy here pay here dealerships sound like a good place to go to when you have really poor credit. But most, if not all, of these dealerships do not report the payment behavior of their customers to any credit bureaus. That means paying to them on time would not help improve your credit.

Moreover, they usually require weekly or biweekly payments which you should make at the lot itself. That doesn’t sound so convenient especially if you don’t live near to the dealership.

CRL’s Warning

The Center for Responsible Lending warns consumers about how abusive buy here pay here dealers can get.

In an illustration, the CRL explained that the abusive cycle starts with the dealer’s purchase of a used vehicle at an auction. The prices of vehicles here are usually only less than $10,000.

The dealer may spend money on repairs and detailing before putting the car on the lot. But that additional cost does not make the car worth twice or thrice its value.

The dealer, however, would mark up the price and sell the car at with a double-digit interest rate. Believe it or not, a lot of buyers do agree with these terms.

When the buyer misses a payment, the dealer will be quick to repossess the vehicle which will be put on the lot again.

The cycle goes on with a new buyer.

This may not be the case in all BHPH dealers but you’ll come across a lot of abusive ones when you go out to look for car.

Dealing with BHPH Dealers

As mentioned, not all BHPH dealers are dishonest and unscrupulous. But you have to make sure that the dealership you’re about to business with can indeed help you. Here’s how:

• Find out if the dealership reports payments to credit bureaus. It’s important to know beforehand because you want to improve your credit by making timely payments.
• Ask about any available warranty. Some BHPH dealers sell cars “as is” because they only clean them up and never examine them for defects after buying them at auction.
• Clarify repayment and repossession terms. Some BHPH dealers are very strict with their payment policies. Do not sign the agreement unless you understand every clause written in it.
• Avoid extending the loan term. If you think stretching the repayment period will save you money, think again. Prolonging the life of the loan may make your monthly payments smaller, but it only makes the entire loan more costly.
• Don’t go to a BHPH dealer immediately when shopping for cars and financing. There are a lot of alternatives now for people with shaky credit. You can check out the rates in banks and credit unions first before walking into a dealership. You might also want to consider car financing programs provided by the financing arms of automakers.