No credit check car dealerships are car dealers who finance vehicles themselves, without going through a third-party lender. These dealerships are known by many names, including buy-here-pay-here dealers, tote-the-note car lots, or in-house financing dealerships. At these car lots, you typically only find used vehicles, and you may have an easier time getting a car if your credit isn't stellar.
However, these types of dealerships can also be expensive. You essentially pay for the privilege of not having your credit checked. Typically, this means a larger down payment and a higher interest rate. Here's what we know about car dealerships with no credit check.
What Are No-Credit-Check Car Dealerships?
No credit check cars can come from a number of places, but typically these are independent dealers known as buy here, pay here dealers or BHPH lots. Sometimes, even franchised dealerships have a BHPH lot on the premises that can make car buying easier for people who are suffering from credit issues.
These are dealers that typically don't check your credit to approve you for a car loan. Instead, they look at your income and down payment amount to determine if you can get a car. These dealers usually require a higher down payment amount than a subprime lender, who may only require 10% down. BHPH dealers usually require at least a 20% down payment for a vehicle.
At these car lots, you will find older used vehicles and end up paying a higher interest rate to offset the fact that the dealer didn't check your credit score. Because of this, it's possible that you could end up paying more for a vehicle than it's worth.
Options for Buying a Car Without a Credit Check
You have many options for buying a car without a credit check, but they will all be used. You're not going to find a dealership selling new vehicles that won't check your credit. With a new vehicle, dealers have to protect their investments and be sure you are going to repay the loan. The fastest and easiest way to determine this is by seeing how you've handled credit in the past.
Buy Here, Pay Here (BHPH) Dealerships
Whether you call them in-house financers, tote-the-note car lots, or anything else, BHPH dealerships are the most common form of in-house financing lenders. At these dealers, you purchase and finance your car at the same place, and often, making payments in person is required. These car lots use dealer financing instead of going through a bank, credit union, or third-party lender to finance you. They do the financing themselves.
Since they finance your loan themselves, the dealers at BHPH lots often have more flexibility in lending and can finance people with all types of credit, including no-credit borrowers. This is because they don't typically perform a credit check to help you qualify for financing. Instead, they rely on your income and employment information, and they require a larger down payment. A down payment is always a requirement at an in-house financing dealer.
Pros of Buying a Car Without a Credit Check
Buying a car with no credit check may seem like the ideal situation; however, it has its ups and downs, like all financing. Luckily, there are a few perks that can make it worth your while.
- One-stop shop. Since you don't have to wait for a third-party lender to approve your financing application, you can typically get in and out quickly at a BHPH dealer. Often, you can drive away from the car lot in your newly financed vehicle the same day.
- Possible to skip the credit check. The biggest perk of going through an in-house financing dealer is that they typically skip the credit check. This can mean the difference between approval and denial in some cases where borrowers have less than good credit.
- Easy to make payments. Often, these dealerships may require payments to be made more frequently than at a traditional dealership, sometimes requiring payments weekly. The good thing is that now, you typically can make payments electronically, and don't always have to pay the dealership in person.
Cons of Buying a Car Without a Credit Check
Just like there are pluses to buying a car with no credit check, there are some drawbacks, too.
- Limited selection. Since BHPH dealers only deal in used vehicles, you're likely to have a more limited selection to choose from when it comes to a vehicle. It's important to take a test drive at these dealerships to ensure that everything is as expected. Cars from in-house financers come as-is; there's no return policy if something goes wrong.
- Higher interest rates. Because the dealer is skipping a credit check, they typically charge a interest rate to offset the possibility of having a borrower with bad credit.
- No credit repair likely. When a dealer doesn't check your credit, they typically don't report to the credit reporting agencies, either. This means your on-time payments won't be recorded, and you're not likely to gain any points on your credit score.
How to Protect Yourself When Buying a Car With No Credit Check
In order to protect yourself when you buy a vehicle with no credit check, you must do your research. Check everything you can about the dealership's reputation before you dive into a deal at a BHPH lot, and get all your contracts in writing.
Many of these lenders have poor reputations or reputations for being strict about payments, repos, or potentially predatory lending. Some of these car lots also have a reputation for selling vehicles that are in poor condition, so it's also very important that you test-drive every car you are thinking about buying. If a dealer won't let you take a test drive, walk away. It's also a good idea to take a vehicle from an in-house financer to an independent mechanic to get an inspection before purchase.
Also, keep in mind that BHPH dealers often install tracking systems that can remotely disable your car if you miss a payment. This allows them to easily find and repossess a vehicle when necessary, but it can be tricky to manage when you have to make frequent payments.
Be sure to read all the fine print in your contract and question anything you don't understand. Look out for hidden fees, and check to see if the dealership has any warranty or return policies (this isn't common, but does happen).
The Bottom Line
If you’re in a pinch, a buy-here-pay-here dealership can definitely help in the short term. But looking long-term, a BHPH lot could end up costing you more in interest charges, and some won’t improve your credit score for later car loans.
At Auto Credit Express, we can help connect you to a dealer that has special financing – BHPH dealerships aren’t your only option. Simply fill out our free auto loan request form, so we can look for a local dealer in your area that works with borrowers in unique credit situations.
