Obtaining auto financing directly from a dealer without the use of a bank or loan company, sometimes gets a bad rap. People dismiss it as a scam or a predatory deal. This is not always the case, and especially if you have bad credit, the buy-here-pay-here lender can be a really good option for those who need a car.
Auto Loans for Bad Credit
It can be tricky to finance an automobile if you have bad credit. At very least you will get unfavorable terms in your loan or at a long term. Before you know it, you could be in over your head.
Buy here, pay here dealers, on the other hand, can be a great way to get a used car as a temporary fix on a short term loan. Certainly the loan won’t see a low interest rate, but if you have poor credit this is a fact of life. However, these sorts of lenders provide financing over a year to 1.5 years instead of 3-5 years, and don’t check your credit.
Buying and Paying
When you purchase a car through buy here, pay here, you usually just need a down payment, which will cover the lion’s share of the dealer’s investment in the car. Your monthly payments and interest, then, are the profit the dealer makes.
To make sure that payments are made on time, dealers often put a computer on the car’s starter system which can be used to shut down the vehicle if you miss a payment, after which the dealer can repossess the vehicle if you don’t make the payment quickly. This might seem scary, but on the other hand, you should make sure that the car you are buying is one whose payments you can easily afford!
Payments for buy here pay here lenders are generally in cash or money order. Checks are rarely accepted, and you make the payments at the dealer where you bought the car.
Here is the big advantage to the buy here pay here dealer. If you do get in over your head, and the car ends up being repossessed, many of these dealers do not report repossessions to credit agencies, which means that it won’t further negatively affect your credit rating. You might want to check with your local dealer to see if this is the case, before entering into the agreement.
While this also means that paying on time won’t improve your credit, using this type of lender can give you the time and freedom you need to improve your credit in other ways.
If you are careful to have the vehicle checked over by a mechanic before buying, and you take out a loan for a very short term, a buy here pay here lender can be a great tool for buying a car with poor credit.