Buy Here Pay Here Car Dealerships - What You Need to Know
  • Buying Guides

Buy Here Pay Here Car Dealerships - What You Need to Know

By Autolist Editorial | August 30, 2021

Your next car is sitting at a car dealership up the road. It has your name all over it, and you may have already taken it for a test drive to confirm that it is the right car for you. However, you do not have the cash available to buy it outright or approval for an auto loan. So, now what? If the dealership is a buy here pay here dealer, they can help you by setting up an in-house financing plan.

Dealing with a buy here pay here dealership is often a lot easier than working with a traditional one, especially since they become a one-stop-shop for car buyers who need finance. Don't settle too quickly on the idea, though; there are several pros, but there are some cons too. You can expect to pay more for your new vehicle. Continue reading as we explore what a buy here pay here dealer is, how they work, and the pros and cons of purchasing a car from one.

What is a Buy Here Pay Here Dealership?

When you sign a contract or a bill of sale to purchase a car with a traditional car dealership, they will hand the contract over to an auto lender to finance the auto loan. With a buy here pay here (BHPH) dealership, the dealer will handle the role of selling the vehicle and financing it.

Buy here pay here dealerships specialize in car buyers who have bad credit or no credit history at all (i.e., no credit score). Since lenders may consider the buyer high-risk, the car dealer provides the buyer with an opportunity to finance the vehicle with them. However, since a financial institution may consider you a high-risk borrower, you will be paying a higher-than-average interest rate through a buy here pay here dealer to drive away in your new vehicle.

How do Buy Here Pay Here Dealerships Work?

Buy here pay here dealers offer in-house financing, which means that you will make your monthly payments to the dealership itself and not a finance facility, such as the bank. They will still do a credit check on you, but even if your credit score is low, they may still provide you with a car loan to finance the car you wish to purchase from them.

Most buy here pay here dealerships offer a warranty on the vehicle; usually, the warranty provided is a standard one month/ 3,000-mile warranty.

The Pros of a Buy Here Pay Here Dealership

Below are a few of the advantages of a buy here pay here dealer:

  • Approval for low credit-challenged buyers- If you have a low credit score or no credit history, you will be pleased with the potential of approval for a car loan with a buy here pay here dealer. Approval standards with a BHPH dealer are typically lower than most traditional lenders. If you are credit-challenged and need to finance your car, then there is some hope with this method.

  • The car buying process is simple- When purchasing a car from a BHPH dealer, you are done with all the paperwork and financing when you drive your car off the lot. It may take some time to complete the loan process with traditional car dealerships, especially if you have bad credit. There is less hassle when dealing with a BHPH dealership, and the process goes more quickly.

The Cons of a Buy Here Pay Here Dealership

Below are some of the disadvantages of a buy here pay here dealer:

  • Higher interest rates- The interest rate offered by a BHPH dealer is much higher than the rates offered by banks, lenders, and credit unions. Depending on the car dealer, you can expect to pay an interest rate as high as the maximum rate your state laws allow. If you do not keep a close eye on the contract, there may be some hidden fees that drive up your total cost of the auto sale.

  • Higher risk of borrowing more than the car is actually worth- Financial institutions and auto lenders normally place a cap on the amount they will lend based on the vehicle's value. However, a BHPH dealership may not limit the amount, which means you could potentially end up paying thousands of dollars more than the vehicle is worth. This could negatively impact any future trade-in opportunities if the amount owed on your used car is too high.

  • The car loan may not help you build credit- A BHPH dealer may not report your monthly payments to the major credit bureaus, such as Experian, Equifax, and TransUnion. So, if you are diligent with your monthly payments, the credit bureau may not see it.

  • The vehicle tracking device may be non-negotiable- As a credit-challenged car buyer, the dealer may install a vehicle tracking device to track the car or prevent it from starting if the vehicle needs to be repossessed.

Large down payment required- Working with buyers with bad credit means BHPH dealers carry a lot of risks when providing a car loan. To help mitigate the risk, they will typically require a large down payment for the car than a traditional car dealership would.

DriveTime Buy Here Pay Here Dealership Chain

If the cons of a buy here pay here dealership is easy enough to look past, then you may be wondering where you can find a BHPH dealership? DriveTime is located mainly through the Midwest and has approximately 77 locations. You can find them throughout Georgia, including Atlanta, Buford, Duluth, Gainesville, Jonesboro, and Marietta, as well as Tennessee.

Several branded dealerships also offer buy here pay here options, including:

  • Chevrolet
  • Chrysler
  • Honda
  • Nissan

Buy Here Pay Here Scams

Buying a new car is exciting; however, the excitement can quickly turn into despair if you get scammed. While government regulations protect car buyers, not all car dealers and sellers stay within the boundaries of ethical business practice.

Be careful of the following:

  • No vehicle history report- Always demand a vehicle history report when purchasing a used car. If the seller cannot provide one, then use a service like Carfax or Experian to obtain one. You can use a car's vehicle identification number or VIN to learn about the car before finalizing your contract.

  • Spot delivery- Never drive a vehicle away from a dealership unless you are fully approved and have signed the contract. Spot delivery is a risky technique where a buy here pay here dealer allows you to drive the car off the lot before concluding the deal. They will then call you to demand more money or even re-negotiate the loan. To avoid being a part of a scam, take along a witness and always keep a paper trail of the car buying process.

  • Hidden fees- We briefly mentioned the possibility of hidden fees in your contract. Ensure the sale price is exactly as discussed and take your time to read through the entire agreement. Ask questions if you need to.

  • Finagling financing- Before committing to your car loan with a buy here pay here dealer, first do your homework on the car's value. Use resources like the Kelley Blue Book, J.D. Power, or Edmunds to help you better understand the value of your new car.

Whether you purchase your car from a traditional dealership or a buy here pay here dealer, always do ample research on your future vehicle to ensure it is exactly what you want and can afford.