We have all seen the advertisements for Buy Here, Pay Here car lots. They promise guaranteed approval for buying a car no matter what your credit score looks like. These lots are perfect for people who have bad credit, or who have not had enough time to build a solid credit score. But, are Buy Here, Pay Here car lots really the saving grace that they seem? When should you visit a Buy Here, Pay Here car lot? We hope to answer all of these questions and more.
So How Does Buy Here, Pay Here Work?
Buy Here, Pay Here (BHPH) lots are designed to cater to folks with zero or bad credit because they do financing in house. There is no bank backing up their accountants, taking the financial risk, or running your credit score. To cover that risk, BHPH dealers usually require an interest rate of around 20%, which is more than you would expect to see from a bank or credit union loan. In contrast, the average traditional car dealership loan can offer interest in the 4-6% range. It’s also worth noting that some states have rate caps, which will affect how much interest BHPH lots can charge.
The BHPH lots that are most successful are able to walk the tightrope of keeping sales – and therefore, the amount they finance – low. This includes keeping the risk factor from their customers low and potentially requiring a larger down payment to be made to compensate for lower payments. As technology becomes more accessible, BHPH lots are able to leverage that to increase their bottom lines. The tools they use may include handy online pay portals to allow for direct debiting and GPSs to track cars if the buyers don’t pay.
After a slight decline in 2017, the average BHPH dealer sold 816 cars in 2018. The average cost per vehicle was around $7,004, and the sales required, on average, a $950 down payment. If you’re looking to buy from a BHPH, you may be interested to know that the average weekly cost of a loan from these lots has averaged around $90 for the past five years and the average repayment term is about three and a half years. You can expect to pay that weekly cost on a weekly or sometimes bi-weekly basis.
When to Visit BHPH?
The obvious benefit of Buy Here, Pay Here lots is that they will generally help anyone with any credit score. Sometimes, life happens, and it takes a hit on your credit score. Credit scores can dip for any number of reasons, but it shouldn’t prevent you from being able to own a car. Or, you may have never had a reason for credit or have just turned old enough to get a loan on your own, and you need to build from the ground up. Whatever your circumstances, BHPH dealers are often able to make a deal for you. Because BHPH dealers cut out the middle man, they also have the ability to make a payment plan that fits your specific needs and find a car that fits in your budget.
Another benefit of BHPH lots to consider is that they are often more willing to take a trade-in that traditional dealers would either not accept or offer very little for because they would have a hard time flipping it for resale. Plus, cutting out the process of running your credit through tons of banks and hoping to find one that will accept your loan is a weight lifted and time saved. Decisions can be made expeditiously, and you could even head out with your new-to-you car the very same evening.
A hidden benefit to BHPH lots financing themselves means that unlike a traditional dealer, they won’t be shopping your credit out to various lenders. Whenever someone runs a hard check on your credit, it dings your score, and if you’re shopping at a BHPH due to low credit, that is the last thing you want. Another perk is that instead of selling you a car and then shoehorning you into a payment plan you can’t afford, like a usual lot, BHPHs won’t let you fall in love with a vehicle that is out of your budget. You determine your budget before you even shop, and they will only show you cars you can afford.
As an added benefit, if you buy from a Buy Here, Pay Now car lot, you can actually start to rebuild your credit score. BHPH car lots offer the unique opportunity to make a large purchase that you constantly need to make on-time payments for. The more you make payments on time, the more it will help your credit score. This will take some time to have a significant effect on your score, but it is a solid starting point towards getting back into good credit standing.
Things to Keep in Mind
The most obvious downfall to Buy Here, Pay Here is the interest rate; there is just no way around that. However, if you are in need of a new vehicle with poor credit, you are going to encounter high interest even if you do get financing from a third-party. This also goes hand in hand with a higher down payment. Because the dealership is taking all of the risk, they are going to require more money from you upfront to help mitigate that risk.
Alongside the benefits of having a weekly car payment is also the downside of a weekly car payment. This is definitely a bit more intense to keep up with than having a monthly payment, but it is helping you in the long run. This will also allow you to pay back your loan quicker, but may come with the inconvenience of having to visit the dealership to make the weekly payments. Luckily, most Buy Here, Pay Here car dealers are adapting to systems that allow phone and online payments to make payments easier than ever.
Visit a Buy Here, Pay Here Car Lot
As long as there are people out there who need some help getting a car, but may not have the credit for it, Buy Here, Pay Here car lots will be a great alternative. Traditional lots and lenders are going after customers with less credit risk, which means BHPH lots have a lot to offer buyers with less than stellar credit records. Rising new car prices and interests combined mean that even more people will be looking for used cars, and you may find a better deal at a BHPH lot than you would at a traditional dealer.
If you think that your credit is going to keep you from being able to afford a car, then talk to the dealers at a Buy Here, Pay Here car lot to see what they can offer you. Approval is almost guaranteed, and they don’t try to sell you cars beyond your means. Buy Here, Pay Here car lots are an excellent way to buy a car while also raising your credit score rather than lowering it. So, visit your local Buy Here, Pay Here car lots to see what they have in stock and how easy it is to get an affordable vehicle.
