As you’re probably aware by now, the average interest rate for a car loan is higher with bad credit than it would be if you had good credit. When it comes to auto financing, what you qualify for is often based on your credit score. But what if you’re financing a vehicle from a buy here pay here (BHPH) lot that doesn’t use your credit score?
Interest Rates at Buy Here Pay Here Dealerships
The average interest rates at buy here pay here dealerships are likely to be on the high side. According to the Experian State of the Automotive Finance Market report from the second quarter of 2019, here are the average interest rates by credit score at independent used car dealers:
| Credit Score | Average Interest Rate at Independent Used Car Dealerships |
| 781-850 | 4.88% |
| 661-780 | 7.22% |
| 601-660 | 13.08% |
| 501-600 | 18.75% |
| 300-500 | 20.76% |
BHPH car lots are often used by borrowers that have been turned down for traditional and subprime auto loans, or who have little to no credit. Typically, these people fall into the lowest possible credit tier with scores ranging from 300 to 500. The interest rates for people in this credit score range are likely to be well into the double digits.
When you’re shopping for a used vehicle, no matter your credit score or where you’re looking, dealerships are allowed to charge up to the state maximum interest rate for a car loan. The maximums vary widely, running from lower ones such as 16% in New York and 18% in Florida and Texas, to higher rates of 25% in Michigan. Some states – California and Illinois, for example – don’t have a state maximum interest rate for auto loans.
Interest Rates Based on Credit
You may wonder how interest rates can vary at places like BHPH lots, since they’re known for being “no credit check” car lots. Many buy here pay here dealers do check credit scores these days, even when they typically base your loan on your income.
Many old ideas about BHPH dealerships don’t hold true anymore, even though some – like higher interest rates – do. These days, buy here pay here dealers are just as likely to check your credit score and report your on-time payments as some other lenders.
BHPH lots are even moving into the digital era along with their fellow car dealerships, with some allowing a range of payment options that go beyond the traditional weekly, in-person payments. BHPH dealers may even offer the option of making monthly payments online.
When you’re shopping for a used vehicle, especially as a bad credit borrower, it’s important to know your credit score and what’s on your credit reports up front. This way, using data from credit bureaus like Experian, you can find out the average interest rates for people with similar credit scores, which allows you to know what to expect, and be more prepared for your car loan.
Buying a Car from the Right Type of Lender
If you’ve been turned down for a traditional auto loan, you may think a BHPH dealership is your only option, but you may still be able to get a subprime car loan. With a subprime loan, you may still pay a higher interest rate than borrowers with good credit, but you typically have a wider range of financing and vehicle options than you’d have at a buy here pay here car lot.
If having more options and the chance for a lower APR sounds good to you but you’re not sure where to look for a subprime lender, we’ve got you covered. At CarsDirect, we work with a large network of special finance dealerships across the U.S. that have the lending resources you’re looking for.
We want to help you cut out the hassle of searching for your next auto loan by matching you to a local dealer. To get the process started right now, simply fill out our easy car loan request form.