How Do Buy Here Pay Here Car Lots Work?

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Even with poor credit.

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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.


, - March 27, 2019

Buy here pay here (BHPH) car lots work differently than traditional dealerships because the dealers at BHPH lots are the lenders. Also known as tote the note dealerships, BHPH lots often get a bad reputation based on some outdated notions, but they can be a welcome option for people who struggle with bad credit.

BHPH vs. Traditional Car Loan Processes

When you go to a BHPH car lot, you can often sign and drive in the same day, depending on the dealer’s requirements and how prepared you are for the loan process. Because the process is handled in-house at BHPH lots, it can often be faster – there’s no waiting for the finance manager to contact any lenders for an approval.

Also, you usually don’t have as many qualifications to meet as a bad credit car buyer compared to traditional car lots. If you’ve got a down payment and the income to make your payments, you’re typically good to go. However, requirements vary by BHPH lot, so make sure you know what you need before you get there.

Payment Requirements Differ at BHPH Lots

Unlike a traditional dealership that relies on third-party lenders to finance borrowers, buy here pay here car dealers are the lenders. This means they’re putting up their own money to finance these loans.

Since BHPH dealerships offer loans to borrowers with really bad credit, they often ask for larger down payments than you would need at a traditional or special finance dealer. Aside from making a bigger down payment, you may be required to make payments more than once a month, depending on your pay schedule.

In years past, BHPH lots held to the payment process that’s implied by their name: buy here, pay here. This meant buy here pay here car lots worked by requiring customers to come into the dealership to make their payment in person. Recently, a growing number of BHPH lots have put this notion to rest and allow customers a wider range of payment options, but this varies by dealer.

Another way buy and pay here dealerships work is by not relying on outside sources of financing or your credit to make their lending decisions. In-house financiers tend to provide loans based on your ability to repay. The dealer looks at your income, and calculates your debt to income and payment to income ratios to ensure that you have enough available income to comfortably make the required payment.

However, because these dealerships don’t rely on credit, and are often a go-to for people who are turned down for second chance financing, BHPH dealers often charge more for lending. This means you’re likely to see a high interest rate.

Differences in Vehicles at BHPH Dealers

The lending requirements aren’t the only differences at BHPH dealerships. Typically, you may find vehicles to be a bit older than on a traditional used car lot. The vehicles tend to have higher mileage, as well.

This doesn’t mean every car is like this or that they aren’t in good shape. But, as with any used vehicle, you should look at its history report and have it checked out by a certified mechanic before signing on the dotted line.

Looking for Your Next Car?

If you’ve been turned down for a second chance auto loan with a subprime lender, a buy here pay here lot might work for you. But, if you just assume that’s the route to take due to your bad credit, you could be missing out on a great opportunity for financing you didn’t even know was possible.

Here at CarsDirect, we work with a large network of special finance dealers all across the country that have subprime lenders available to work with people who struggle with credit issues like bad credit, no credit, and even bankruptcy. So, before you narrow the playing field, why not see if there’s a dealership in your area that can help you get the car loan you need?

The process is simple, free, and never comes with an obligation to buy. Just fill out our auto loan request form, and we’ll get to work matching you with a local dealer.

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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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