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Are you currently in trouble securing a loan to purchase a car? Worry no more because the Buy Here, Pay Here (BHPH) dealership gets you covered! They offer in-house financing and primarily target borrowers which possess bad and no credit history. While Buy Here Pay Here is worth considering when your credit is not in good shape, there are also pinpoints that you need to consider.

This article will give you some information on how Buy Here Pay Here works, including the advantages and drawbacks of buying a used car in this type of dealership.

 

The entire mechanism of buy here pay here or BHPH

 

Before you fully understand the advantages and disadvantages of Buy Here Pay Here, it is essential to know its nature in the first place. When you sign a contract to purchase a vehicle in a traditional car dealership, your contract will pass through an auto lender. The auto lender will provide the loan for your car purchase. On the other hand, the dealer sells and finances your car on its lot under Buy Here Pay Here.

Buy here pay here or BHPH specializes in working with people who possess bad credit history or no credit history at all. These people can hardly secure a car loan from a traditional car dealership. With BHPH, people with bad or no credit will have the opportunity to be approved.

When you finance or even purchase a car at a traditional car dealership, you usually choose a car and then the dealer typically passes your information to a network of potential third-party lenders. If you are approved to grant a car loan, you will make monthly payments to the lender that finances the loan.

The case of Buy Here Pay-Here or BHPH, flips the financing and purchasing process in a few ways. BHPH sells and finances used cars straight off their lots. You may also be asked to verify your source of income and your proof of residence. However, the dealer usually does not check your credit but you need to give a down payment.

The Used cars offered on Buy Here Pay-Here or BHPH lots tend to be low-value and older types of vehicles. The average cost for a car on a buy-here, pay-here lot in 2018 was $7,004, and the average down payment was $950, according to a 2019 industry report from the National Independent Automobile Dealers Association.

 

Advantages of buying your used car from a buy here pay here or  BHPH dealership

 

The following are some of the advantages of buying a used car from a Buy Here Pay Here dealership:
Borrowers can get approved even with bad or no credit.

If you are a borrower with bad or no credit at all and you want to purchase a car, BHPH gets you covered! You may think financing a car through a traditional car dealership is out of the question if you possess a credit that is in bad shape. With Buy Here Pay Here dealerships, approval standards are a little much lower than what you will find with traditional lenders. As a result, you will get approved easily.

Many Buy Here Pay Here dealers finance and even sell vehicles to customers with bad credit or no credit histories at all. They even advertise “no credit, no problem” and no-credit-check auto loans” to allow borrowers to get approved with bad credits.

 

Straightforward process

 

When you purchase a car from a Buy Here Pay Here dealership, you are now done with the tedious process of buying and financing when you drive off the lot. As compared to a traditional car dealership, it can still take a while to complete your loan process, especially when you possess bad credit or no credit at all.

 

Little to no money down

 

Buy Here Pay Here dealership also offers the potential to buy a car with no money down, or only a small down payment, such as $500 or below.

 

Disadvantages of buying your used car from a BHPH dealership

 

While there are benefits that a Buy Here Pay Here can give to some with little to no credit at all, there are also downfalls in purchasing Buy Here Pay Here dealerships. It might sound like a good idea to buy from a Buy Here Pay Here dealership since good credit is not a requirement, just remember that it comes with a catch. Outlined below are just some of the disadvantages of BHPH:

 

Gives high-interest rates

 

According to the Consumer Financial Protection Bureau, interest rates on loans from dealerships offering in-house financing or Buy Here Pay Here dealerships can be much higher than those from banks, credit unions, and other lenders.

They charge higher rates on their auto financing as compared to conventional lenders that use finance companies. BHPH financing is always more expensive.

 

High risk of borrowing more than the worth of your vehicle

 

Usually, banks, credit unions, and other auto lenders limit the amount they will lend based on the value and cost of the vehicle. However, the Buy Here, Pay Here dealership provides credit for a purchase of the customers themselves may not do that. In turn, you might end up paying thousands of dollars more than the value of the vehicle according to the Consumer Financial Protection Bureau.

In addition, you will have a higher down payment which leads you to lower payments during the borrowing period. However, a high down payment may be required and may not be easy for you, especially if you are a low-credit borrower.

 

Limited warranties and selections

 

Buy Here Pay Here dealers may only provide at most 90-day warranty on their used cars upon purchase. Often, the selection of cars at BHPH dealerships is more limited than you will find at traditional dealerships.

In other words, instead of choosing the ideal car you want and figuring out your finances, the Buy Here Pay Here dealership looks at your financing first and then gives you a limited set of used cars to choose from.

 

Follow an odd payment requirement

 

Many of these loans require either monthly or sometimes weekly payments. Those payments often have to be made personally.

 

Loans may not help you build your credit score

 

Timely payments on an auto loan may significantly help you improve your credit score. However, it might not work on Buy Here Pay Here dealership as it does not report your payments to one or more of your major credit bureaus. Hence, even if you are keeping a good-paying habit in the Buy Here Pay Here dealership, your credit report may not track the benefits.

Even if you do pay on time, those agencies will not know and you lose an opportunity to ultimately improve your credit score. However, some will. Be sure to ask your salesperson if they report and to which agencies.

Vehicle tracking devices may be installed in your car

 

Some dealers will install a tracking device to track your car or prevent it from starting in order to repossess the vehicle if a customer misses a payment. This is due to the high risk involved in lending to people with poor credit, in the first place.

 

Conclusion

 

In a nutshell, getting approved for an auto loan is not easy, especially if you have bad credit or no credit at all. However, this track is doable. Buy Here Pay Here dealerships offer financing to borrowers with a less-than-stellar credit score but the cons tend to outweigh the advantages that you can get from it.

Always check your credit scores and report, and if possible, take a step back and consider other options that can ultimately help you achieve your goal and cost you less in the long run.