Purchasing Cars from Buy Here Pay Here Dealerships

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Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - November 21, 2017

Unable to afford car purchases with cash, consumers often turn to auto loans for their vehicles, but what happens when bad credit stops a borrower from getting approved?

Car Dealerships that Don’t Care about Credit

Bad credit can make getting approved for an auto loan more challenging. Lenders care about an applicant’s credit situation, and can turn down consumers with spotty borrowing histories.

But there are dealers that can help borrowers with very bad credit. Buy here pay here (BHPH) dealerships finance in-house, meaning the consumer borrows money directly from the dealer instead of a bank, credit union, or finance company. These institutions generally don't check the credit of applicants because they don't rely on third-party lenders.

The lack of a credit check allows consumers who otherwise wouldn't qualify for a loan the chance to finance a car. To get approved for a BHPH loan, a qualifying income, down payment, and proof of residence are typically all that’s required.

What Makes a Buy Here Pay Here Dealer Different?

In addition to the lack of third-party lenders, there are a few more differences when buying a car from a BHPH dealership:

  • The Order of the Process – Instead of deciding on a car and trying to get a loan, a borrower will first meet with a member of the finance department at the dealership to set a budget. From there, the buyer can choose from the vehicles they qualify for in their inventory.
  • Types of Vehicles Available – While some used car lots only carry vehicles that are a few years old, a BHPH’s inventory tends to be more varied. Borrowers will likely find a selection of recent and older used vehicles (which can be a blessing and a curse).
  • Repayment Plans – BHPH loans sometimes require weekly or bi-weekly payments instead of the typical monthly installment. This can be an inconvenience if dealers require borrowers to make their payments in person, which isn't uncommon.
  • Interest Rates – BHPH dealers offset the lack of borrower credit by charging higher interest rates. Borrowers should choose the shortest loan term possible to offset this.

Auto Loans for Credit Improvement

The main appeal of BHPH loans is the lack of a credit check. However, that also ties into one of the largest drawbacks: many of these dealers don't report loans or payments to credit bureaus, meaning the loan can't improve credit through on-time payments like one through a third-party lender can.

If you're looking to improve your credit with your next car loan, CarsDirect wants to help. We connect consumers to car dealerships that are capable of assisting car buyers in many types of credit situations. Start the process by filling out our auto loan request form today.

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


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