Some consumers have many anecdotes full of bad experiences with a used car lot that offered their own financing. Many of these people made mistakes and failed to comply with the terms of their auto loans. Others simply had unfortunate run-ins with unscrupulous business owners.
The truth is that these experiences are not universal. Buy Here Pay Here lots are, in fact, trying to assist a section of the car market that would otherwise not have access to their own vehicle.
What is “Buy Here Pay Here”?
“Buy Here Pay Here” refers to car lots that offer their own in-house financing. They provide their own loans, and are typically underwritten or backed by another financial institution. Other indications that the lot is Buy Here Pay Here (BHPH) are signs posted visibly that advertise “We Finance!” or “No Credit Needed!”
BHPH lots typically service customers with poor credit who cannot secure a car loan from more traditional means, such as a bank. Since they cannot afford normal financing terms, BHPH lots are willing to trust people who do not have any other available means of purchasing a vehicle.
What Are the Advantages of BHPH?
First, if you do not have enough credit to purchase a vehicle through normal loans, this is the most obvious boon.
Second, BHPH lots differ in their sales approach from other car dealerships. At a typical dealership, a salesman will try to talk a customer into a car they cannot afford, only to be denied a loan or financing after all the work of deciding which car to buy. Even if the customer can secure a loan for the vehicle, the terms will often require that person to be paying off the loan for years to come.
BHPH lots, on the other hand, will usually take the time to review your financial situation up front. They will see your proof of income and offer you a selection of vehicles that can match your needs and means.
You will be able to secure a loan that very day without waiting to hear from a financing department or credit bureau. In fact, most BHPH lots don’t even bother with a credit check.
A third advantage to BHPH is that making a large purchase such as a vehicle and paying it off will allow customers to build credit that they otherwise wouldn’t be able to. A BHPH car can be a great first step towards securing more credit in the future that can be used to buy another car or even a home.
Finally, BHPH lots often don’t require a very large down payment for their vehicles. Some may have special deals or events that require no money down for specific cars.
What Do I Need to Be Aware of When Using BHPH?
Always review the terms of your loan carefully, especially the penalties for not repaying. Every car lot is different and will have different consequences.
Make sure that you are fully aware of your responsibilities. Many BHPH lots require you to bring the money directly to the office according to a set schedule.
If you adhere to the terms and pay off your loan as quickly as you are able, BHPH can be an easy way to get a vehicle and help improve your credit.