Buying A Car With A Bad Credit Loan: Buy Here Pay Here Dealers vs. Franchised Dealers

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Even with poor credit.

By

Senior Automotive Editor

Christian Gulliksen is the Senior Automotive Editor for CarsDirect. He was formerly a senior editor with Robb Report magazine, and has contributed to publications like Worth, Variety, The Hollywood Reporter and MarketingProfs.com.

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, Senior Automotive Editor - April 27, 2016

CarDirect Fact: Many car buyers with bad credit will be able to get a loan through a traditional franchised dealer—if you can, it's a much better option than buying from a Buy Here Pay Here dealer.

If you need to finance a car while you're still rebuilding your credit, you might think your only option is a Buy Here Pay Here (BHPH) lot. These are small, independent dealers you'll find in most towns and cities—they often have large banners that advertise "Bad Credit, No Problem" or "We Accept All Credit Applications."

Unless you have a combination of very bad credit and very low income, though, it's probably that a franchised dealer can help you. A franchised dealer is associated with a manufacturer like Toyota or Chevrolet, and sells both new and used cars. Getting a loan with bad credit isn't as difficult as you might think. Thirty percent of American car buyers need what's called special financing—and plenty of franchised dealerships specialize in helping them.

Get pre-approval from a dealer who specializes in loans for buyer with bad credit »

Here are the advantages of buying your car from a franchised dealer:

  • Quality may be less consistent at a BHPH dealer. All dealers buy cars from auctions—this is perfectly normal. But BHPH dealers will usually have older cars with more miles. And because they do in-house financing, they may have sold and repossessed that same car you're looking at more than once.
  • Franchised dealers also offer certified pre-owned (CPO) cars. Not every car on a franchised dealer's used lot will have a factory warranty, but you do have the option of buying one with an excellent coverage plan from the manufacturer.
  • Financing through a BHPH dealer won't necessarily rebuild your credit. When you finance through a franchised dealer, the lender will report your timely payments to the credit bureaus; a BHPH might do this, but it's possible they'll only report negative activity—like missed payments.
  • Franchised dealers are accountable to manufacturers. Franchised dealers have an added incentive to treat you fairly because automakers demand high customer satisfaction scores in frequent surveys. This isn't to say you won't find fair treatment at a BHPH dealer, but having the ability to escalate problems to manufacturers gives you an extra measure of security.

Let CarsDirect match you with a dealer who understands your credit situation »

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, Senior Automotive Editor

Christian Gulliksen is the Senior Automotive Editor for CarsDirect. He was formerly a senior editor with Robb Report magazine, and has contributed to publications like Worth, Variety, The Hollywood Reporter and MarketingProfs.com.

Follow On: Google+ | Website

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