Is a Buy Here Pay Here Dealership Right for You?

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - July 7, 2020

If you’ve had some credit issues in the past, or just some financial bumps in the road, you may be considering buying your next vehicle through a buy here pay here (BHPH) dealership. We cover the pros and cons of these in-house financing used car lots, and what your other options might be when you have bad credit.

What Is a BHPH Dealership?

A BHPH dealership is a used car lot that has in-house financing, which means that your dealer is also your lender. Instead of applying with a third-party lender through a dealership or applying with a direct lender at a bank, you apply at the dealership. This means that all vehicle shopping and lending are done at one location, which can be very convenient if you need a car quickly.

Possibly the biggest advantage to shopping at a BHPH dealer is, most of the time, they won’t check your credit. For those with a really low credit score, or borrowers with a lot of negative marks or no credit, it could be the right route.

While BHPH dealerships can approve borrowers with all types of credit, there are some downsides to consider. Depending on your situation, they may not be your best choice.

When to Consider a BHPH Car Dealership

There’s the obvious reason why a bad credit borrower may want to look at a BHPH dealership: the lack of a credit check. Many traditional lenders start to get hesitant about approving borrowers with credit scores of around 660. If you’re below that, you’re likely to need a bad credit lender or dealer. However, a BHPH dealership doesn’t typically consider your credit reports or your credit score, which could mean a second chance at auto financing.

Another reason why a BHPH dealer would be a good idea for you is if you have multiple repossessions on your credit reports. In most cases, lenders won’t consider you for financing if you have more than one repo – it’s a big red flag. However, the lack of a credit check from a BHPH dealership means they won’t see the repossession, or they simply won’t care. They’re mostly concerned with your ability to pay the loan, not so much with your credit history.

Another situation when it might be in your best interest to consider a BHPH car loan is when you need a vehicle right away. When you’re working with a traditional lender or dealer, the car buying process could take a few days to complete, or maybe a few weeks for you to find the right lender.

Oftentimes, if you go to the BHPH lot with a down payment and your check stubs in hand (to prove your income), you can usually drive off with the vehicle the same day. The process is quick because there’s no waiting on a third-party lender to approve your credit, since your lender is your dealer!

For those with lots of credit damage, or those in a hurry, a BHPH dealership could be just what you need. But while there are many upsides to in-house financing, there’s another side to the coin.

Downsides to In-House Financing

There are two sides to no credit check dealerships, and one of the biggest disadvantages is that your auto loan may not be reported to the credit bureaus. This would mean that even if you made every single payment on time, it wouldn't improve your credit score.

However, the BHPH dealer is going to report missed or late payments. This means that you can have more damage done to your credit reports, but you may not be given the opportunity to heal them with a good repayment history.

Another big disadvantage that comes with in-house financing is that you’re likely to pay more interest charges. This is because BHPH dealerships usually have higher interest rates on their car loans, which could be considered the trade-off for not checking your credit reports.

One more thing: expect to need a down payment. Since these dealers don’t normally check your credit reports, they typically require a large down payment. It could even be around 20% of the vehicle’s selling price. The type of car you choose to finance largely determines how much your down payment is going to be, but you’re going to need to have a sizable down payment and a steady income to be considered for a BHPH auto loan.

If these drawbacks don’t seem like something you want to agree to, you have another bad credit financing option.

Subprime Auto Loans and Bad Credit

If you have bad credit, BHPH dealers aren’t the only option for getting into your next auto loan. There are subprime lenders that work through a dealership’s special finance department, and they look at more than just your credit score.

When you apply with a subprime lender, they do review your credit reports, but they also take a look at your financial situation as a whole. This means looking at your income, your living stability, your work history, and having you provide a down payment (usually at least $1,000 or 10% of the vehicle’s selling price) that shows you’re invested in the car loan.

The biggest advantage of working with a subprime lender is that your auto loan would be reported to the credit bureaus. This means that with each on-time payment, you can improve your credit score and increase your chances of getting approved for better loan rates and terms in the future.

Ready for Your Next Car Loan?

Now that you’ve been introduced to the world of bad credit dealerships, your next step is making a decision and locating a dealer that can work with your credit. Instead of driving all over town and wasting time and energy, why not just start with us at CarsDirect?

We connect bad credit borrowers to dealerships with the lending resources they need – at no cost! To begin, complete our quick and secure auto loan request form. Once that’s done, we look for dealers in your area that can work with your credit situation. There’s never an obligation to buy, so let’s get you back on the road!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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