Can I Get Out of a Buy Here Pay Here Contract?

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - August 6, 2019

Getting out a buy here pay here (BHPH) contract is much like getting out of any car loan – you have a few options to consider. But, unless you want a repossession showing up on your credit reports for the next seven years, all the options involve making sure your loan contract is paid in full.

Getting Out of a BHPH Contract

Getting out of any vehicle loan contract early can have its challenges, and this is especially true at a buy here pay here dealership. So, how do you get out of a BHPH contract? A lot of people would tell you not to get into one to begin with, but we know that in-house lenders can be a good option for many bad credit car buyers.

Many borrowers may be tempted to just return the vehicle to the BHPH lot and walk away. This might make sense because you haven't finished paying for the car yet, so you might think this is doable. This isn't the case, however. Any time you sign a contract agreeing to pay X amount for a vehicle, you're bound to it, and have to pay the agreed upon amount regardless of what happens to the car.

Just because you have to complete the loan contract doesn't mean you have to be stuck with a vehicle you no longer want. You have options, whether you bought from a buy here pay here dealer, a franchised used car lot, or a private party.

Options for Getting Rid of a Vehicle

When you need to get rid of a vehicle you no longer want, you have a few options. If the car is in good working order, you can sell it yourself, trade it in at another dealership, or return it to the BHPH lot you bought it from. Because you don't own the vehicle until it's paid off, you have to get a payoff amount from the lienholder – which is your dealer in the case of a BHPH car loan.

If you choose to trade the vehicle in at another dealership, you need to make sure that the car’s actual cash value is equal to or more than the payoff amount, or else you run the risk of having to add cash to make up the difference in order to pay off the loan. When a vehicle is worth less than the loan balance, it's called having negative equity.

In rare cases, the lender may allow you to roll the negative equity into your new loan, but all this does is increase the cost of the loan, and results in additional interest charges over the loan term.

Returning a Non-Working Car

When you return a car to a dealer, for whatever reason, without the intention of continuing to make payments, it's considered to be a repossession. The repossession shows up on your credit reports whether you bring it in yourself or let the vehicle recovery company sent by the lender come and take it away. If you bring it back yourself, it’s called a voluntary repossession.

Both forms of repossession stay on your credit reports for seven years. Also, in both cases, you're expected to pay any remaining loan balance following the sale of the car. Failing to pay could lead to the buy here pay here dealership taking additional collection measures, such as filing for a wage garnishment with the court. The only upside to voluntary repossession is that you can save yourself from having to pay some repossession fees.

In Conclusion

One thing to remember is that most used vehicles are sold as is. That means there's no warranty protecting you if something goes wrong with the car before you've finished paying off the loan. Because loan contracts from BHPH dealers can be more difficult to get out of, why not get an auto loan from a special finance dealership instead?

These dealers work with subprime lenders that have the ability to work with bad credit car buyers. If you need a vehicle, CarsDirect wants to help. Simply fill out our easy, no-obligation auto loan request form, and we'll start the process of matching you to a local dealership. What are you waiting for? Start now!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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