A Buy Here Pay Here dealer is going to be your last resort if every other option for financing a car purchase is closed to you. Buying a car on a cash basis is simply impossible for most of us. This makes financing by banks, credit unions, car makers and third-party lenders a convenient choice for some.
However, there could be several reasons why such financing institutions won’t approve your car loan. Cases such as very low or even no credit score at all as well as a spotty credit history could make your loan application turned down by such institutions. When this happens, a BHPH dealer is going to be your best choice.
What is Buy Here Pay Here?
Buy Here Pay Here also known as BHPH financing means that the loan is arranged by you and payments are going to be made directly to the car dealership where your car was purchased. It’s convenient due to the fact that the car dealer is also the financing company.
In this case, it’s the BHPH dealer who’s going to do the loan decision and because they want to sell you a car, you will easily get approved. As long as you have a steady income and a verified address, you’ll have very good chances of driving home the car that you want.
However, offering you a loan is an option that the dealer would also have. The profit they’ll get on the car is almost the same as the profit that they’ll get from financing and as a borrower who’s considered a “high risk” one, you can expect a double-digit interest rate.
It is recommended that you choose a dealer that’s close to your work or home so you can easily make payments in person rather than mailing it on a monthly basis. Also, the Buy Here Pay Here dealer might require the borrower to make payments weekly or biweekly and in person which is why it’s important to choose a BHPH dealer that’s close to where you are residing.
There are some that accept mail, phone or even online payments but BHPH usually means you’ll be making the payments to the dealership in person.
What’s The Difference Between Traditional and BHPH Dealerships?
The lines that separate BHPH dealerships and traditional dealerships have become blurred in recent years. Nowadays, there are traditional dealerships who already offer BHPH financing for both new and used cars. You might not see BHPH displayed on the windshields of the cars being sold but seeing something like “We Finance” is a code used by other dealers in place of BHPH.
If you’re having a hard time getting financing the traditional way then you can start by checking on used-car lots in your nearest franchised car dealership like Dodge or Chevrolet or whichever is advertising easy hassle-free financing and offers credit rebuilding.
But there’s a downside to BHPH. Since it’s the dealer who’s also financing your car purchase, the whole car shopping experience is usually turned upside down. Instead of you choosing a car and talking about financing, the BHPH dealer will first look into your financial background then determine how much they can lend. In the end, the dealer will show you (the customer) which cars are available for you to buy based on the money they’ve let you borrow. The choices become limited for you at this point.
When going for a BHPH financing option, be sure to ask about the lender’s policies especially on late payments. Is there be a grace period and if there is, how long is it? Be sure to read through the contract and find clear statements in there that tell you how long the grace period is before repossession happens.
Is BHPH For You?
The credit score that you have may look better than what you’re thinking so be sure to go to traditional auto loan financing institutions first. This includes banks, credit unions, and other financing companies. When all of them denies your loan application, that’s the time you can revert to getting your car from a Buy Here Pay Here (BHPH) lender. The benefits of BHPH are as follows:
- Some are willing to buy old cars and would even take an old one as a downpayment for a new car
- They offer convenience to credit-challenged individuals and putting them in a car when all traditional lenders would not
- They can be a good instrument to build your credit. Just be sure to make on-time payments and see to it that the BHPH dealer reports all the history of your payment to the credit bureau.
When all of the traditional lenders turn their back on you, a Buy Here Pay Here dealer would be willing to put you behind the wheels. But again, be sure to check with traditional financing institutions and companies first before going for this option.