Struggling to get an auto loan approval because of your credit history? You may be considering a tote the note dealership. We uncover how they work, what you can expect, and whether or not it could be the right choice for your credit situation.
What’s a Tote the Note Dealership?
A tote the note dealer is another term for a buy here pay here (BHPH) used car lot. These dealerships are most noted for their second chance financing options for borrowers with bad credit. This is because these dealers don’t usually check your credit when you apply for financing.
If you’ve got enough income, a down payment, and enough room in your budget, it can mean an auto loan approval regardless of your credit score or history. For many borrowers with heavy hits on their credit reports – like a recent repossession, bankruptcy, or defaults – a tote the note dealership could be the solution to getting into a vehicle.
Most traditional lenders don’t consider a borrower with a car repossession that’s less than a year old, dismissed bankruptcies, or multiple defaulted accounts. However, tote the note dealers don’t usually check your credit at all when you apply, so your negative marks likely won’t influence their decision during the approval process. If your credit is worse for wear, a tote the note dealership could be one of the better options you have for getting into your next auto loan.
Why Don’t They Check My Credit?
Tote the note dealerships have what's called in-house financing. Put simply, the dealer is your lender. Instead of you going to your bank and getting approved for financing, you walk into a tote the note location, choose a vehicle, and go through the financing process, all in one place.
Since the dealership doesn’t need to rely on third-party lenders, they don’t have to check your credit. Proving you can afford the car and coming in with a down payment can usually get you into a vehicle pretty quickly, and help you skip the credit check altogether.
However, there are some shortcomings of tote the note dealers, and they may not be your only option.
3 Considerations for Bad Credit Borrowers
First, these dealerships may not offer the chance for credit repair. Auto loans are often used by many borrowers to build up their credit with a good repayment history. However, car loans by dealers with in-house financing may not be reported to the credit bureaus. This means that, according to the credit bureaus, your auto loan doesn’t “exist” and your on-time payments can’t help build or repair credit. Some tote the note dealerships report their loans, but if you’re concerned about credit repair and getting into a vehicle, be sure to ask if they do.
Second, tote the note dealers usually require large down payments, which could be considered the trade-off for skipping over the credit pull. Sometimes, the dealership requires around 20% or more of the car’s selling price up front.
Third, the payment schedule for a tote the note dealers may not be the best for your situation. Some in-house financing dealerships require that you make all the payments in person. Others require that you make weekly or biweekly payments. Before you sign the dotted line for your tote the note vehicle, be sure to ask about their payment options.
Other Car Buying Options
Besides tote the note dealerships, there are also subprime lenders for bad credit borrowers. Subprime lenders are third-party lenders, and they do check your credit, but they also look further. These lenders specialize in helping borrowers in unique credit situations.
Subprime lenders are signed up with dealers that have special finance departments. You don’t meet the lender, but you work with the special finance manager at the dealership as you go through the subprime approval process.
These bad credit lenders look at your income, living stability, work history, and many other things to get a better picture of you as a borrower. They do require a down payment, typically of at least 10% of the car’s selling price or $1,000. If you’re approved for financing based on your information, you choose a vehicle with the dealer that fits within the amount you qualify for.
There is a major plus that comes with financing through a subprime lender: credit repair. Subprime auto loans are reported to the credit bureaus, so you can improve your credit score with on-time payments.
If you continually go through lenders that don’t report your payments, it can be really hard to break out of the bad credit cycle. A better credit score means more opportunities for future credit, and a better chance of qualifying for lower interest rates later, which saves you money.
Dealerships for Bad Credit Borrowers
When your credit is low, it can make you feel low, too. But you still have car loan options if you know where to start, and you can start right here, right now, with Auto Credit Express.
Over the years, we’ve created a nationwide network of bad credit dealerships with lending options for borrowers with unique credit situations, including tote the note dealers. If you’re ready to take the leap and get matched to a dealership in your area, fill out our free auto loan request form.