Buy Here Pay Here (or BHPH) car dealerships are a car buying option where the dealership sets up a loan and finances your car payments in-house. So instead of having a bank or an outside source put up the loan for your car like they do in major dealerships, BHPH dealerships finance the whole operation themselves. If you are having trouble getting financed or getting a loan from your bank due to bad credit or no credit and don’t have the money to purchase a car outright, a BHPH dealer may be your only option if you need to get a new set of wheels.
The BHPH industry has gotten a bad rap recently, as some BHPH dealerships were guilty of “churning,” or the act of selling, repossessing and selling the same cars over and over again. LA Times and Last Week with John Oliver both did exposés that opened the public’s eyes to the fraudulent activities and unfair practices that some BHPH dealerships were engaging in. There are bad apples in every batch, unfortunately, but thankfully, when companies that rip people off get exposed, measures are put in place to prevent further incidents and regulations become more strict and more strictly enforced. Not all BHPH dealers are bad folks and not all BHPH dealerships are out to get you, just be careful who you trust.
If you find yourself in a position where you are turning to a BHPH dealership for your next car, just do your research before signing on the dotted line. Make sure that you can afford the payment plan. Make sure that the interest rate isn’t outrageously high. Under 20% is good, under 15% is great, but will most likely be pretty hard to find through a BHPH dealer as opposed to a bank or financing company. Make sure that you understand the process of what happens should a payment be late. You need to know what the difference is between a fee and repossession and what measures will be taken should you fall behind. Some dealerships will work with you and help you restructure your payment plan in emergency situations. Read the fine print of the contract and make sure that you feel comfortable taking on the agreement before you sign.
Know this going in: some BHPH dealers will not work with you if you fall behind on payments. This is in the fine print of the contract. Some companies will install electronic tracking devices into your car so that they can locate the car and repossess it if you miss payments. Some companies install ignition shutdown technology so that they can stop you from even being able to start your car if you miss payments. This is also in the fine print of the contract.
Most reputable BHPH dealers are not fishing for repos in order to churn cars and burn their clients. Most dealers want to keep their clients happy and coming back to do business with them again in the future. The goal should be to see that their customers finish paying off the loans and keep their cars. Repossession should be the final move when all other options have been exhausted. That doesn’t mean that there are not still a few snakes in the grass when it comes to BHPH dealers, so keep your eyes peeled for those looking to take advantage of people who can’t afford to pay off their car note. Always read the fine print and don’t make decisions that feel pressured or rushed. Do a bit of research after someone makes you an offer on a used car. Ask to see the Kelley Blue Book value of the car and compare it to the final cost of the car including taxes and interest. If you think the price is too high, or something is rubbing you the wrong way, make like a tree. There are no shortages of car dealerships out there. Go to a different one.
If you are financing your car instead of going through a BHPH dealer, you still run the risk of repossession if you fall behind on payments, and just like BHPH dealers, some financing companies will work with you and some will not. A financing company will also charge you interest based on your credit score, just like a BHPH, though they will most likely charge a lower percentage. So what is the difference between a BHPH lot and a big car dealership? It’s all in the way they treat the customer and the overall buying experience.
If you go to a regular dealership, you look for the car you want, narrow it down to a few choices, test them out, pick one and then start haggling over the price, payment plan options, adding in extra features, warranty options and more. If you go to a BHPH dealer, you talk finances up front. The dealer gets a good idea of what you can afford and then starts showing you your options of what they have available in your price range. In a major dealership, you decide what you want first and then discuss payment. In a BHPH, you discuss payment, and then you take what you can get or walk away.
This may not be what you envisioned when you thought about the process of buying a car, but if you are at a BHPH lot, it’s because you can’t afford to pick out the car you really want anyway. That doesn’t mean that you have to take whatever deal you get offered. If you don’t feel comfortable with anything at all that happens during your car buying experience, the car itself, the wording of the contract, or if you even just have a bad feeling about the place in general or don’t like the dealer’s haircut or something, bail! That’s right, leave the building. The right dealership, be it a BHPH or financing operation, should make you feel like you’re making the right decision every step of the way. Buying a car, whether new or used, is a major investment and you have the right to feel good about doing it.