When you have bad credit, it's more difficult to get approved for a car loan. Many people assume they won't qualify for one even with a subprime lender, so they often turn to buy here pay here (BHPH) dealerships.
BHPH Dealerships Differ from Special Finance Dealers
Buy here pay here dealers, sometimes called “your job is your credit” dealers, are a type of in-house financing dealership. This means you're borrowing directly from the dealer instead of an outside lender.
The biggest advantage they present is that they don't use your credit score to qualify you. In fact, they likely won't even look at your credit. Instead, you're approved based on your income.
When you're working with a BHPH dealership, this is just one difference between them and a subprime lender. Here are some others you should consider:
- Available inventory – BHPH dealers only carry used vehicles in their inventory. So, what's available to you depends on what they have at that moment in time. Each dealership has their own blend of trade-ins and cars purchased at auctions.
- Higher interest rates – Since you're not getting an auto loan using your credit score, buy here pay here dealers tend to charge higher than average interest rates. This may mean you'll get a rate that's even higher than you would with a subprime lender.
- Making payments – Payments made on vehicles from BHPH dealerships may be required every week or two, depending on your pay schedule. Historically, payments have also been required in cash and in person. More recently, the payment requirements at buy here pay here lots vary widely, as some may accept monthly payments or online payments. Be sure to find out your options ahead of time.
- Higher down payments – A down payment is usually required from bad credit borrowers. At a BHPH dealer, you can expect your down payment requirement to be based on the car's selling price, so it varies.
No Credit Checks at BHPH Dealers
If you've been turned down for an auto loan with a subprime lender due to your credit, a BHPH dealership might be just the solution you're looking for. Typically, because these dealers don't have to rely on third parties such as banks, credit unions, or finance companies for loan approval, it's not necessary for them to check your credit.
However, when BHPH dealerships don't check your credit, they don't always report loans or timely payments, either. So, make sure that you know whether or not the dealer you're working with reports your on-time payments to a credit bureau(s) before you sign a contract.
If they don't, you can't improve your credit score through a car loan from them.
Finding a Dealership Near You
Since you can't always build credit with a BHPH dealership, you should try working with a subprime lender, instead. These lenders are signed up with special finance dealers and look at many other factors in addition to your credit score to approve you for auto financing. Plus, getting a car loan through a subprime lender is a great way to improve your credit score.
If you're ready to begin searching for your next vehicle and find a lender that can help you get an auto loan, CarsDirect wants to assist. We're teamed up with a nationwide network of special finance dealerships that have the lending resources available to help people who are struggling with credit issues.
Get the ball rolling today by filling out our free and easy car loan request form. Once you do, we'll work to match you with a local dealer. There's never any obligation, so don't delay, get the process started right now!
