Borrowers with less than perfect credit ought to know the difference between the auto loans offered at new car dealers by subprime lenders and those from BHPH car dealers

Our experience

Car buyers with problem credit that need an auto loan are often unaware of the differences between the loan programs offered by new car dealers with effective special finance departments and those offered at smaller tote the note car lots.

Here at Auto Credit Express we can understand this confusion because we've spent the past twenty years matching consumers with bad credit that are searching for online car loans to those dealers that can offer them their best chances for car loan approvals.

But for these buyers clearing up this confusion can mean rebuilding their car credit and improving their credit scores instead of being stuck in a loan with a stratospheric interest rate for high-mileage used car.

Buy here pay here car lots

When taking out a loan at a car lot that offers BHPH financing, the loan is arranged with the car dealer and payments are made at the dealership. This is because credit applications are approved by the dealer instead of a third party lender, such as a bank or finance company.

Although some of these "tote the note" dealers will accept weekly or bi-weekly payments online or by phone, most of these loans specify that customers make their payments in person at the car lot.

Lately a growing number of new car dealers have begun to offer this financing option – sometimes at their dealerships but more often at smaller satellite used car lots. Although these dealers rarely advertise that they offer "Buy Here Pay Here" loans, phrases such as "We Finance" usually indicate that they participate some type of in-house financing.

In addition to the size and location of most of these lots, the buying process is also different. At most new car dealerships, a discussion about financing only happens once a car is picked out. It's at this point that the finance manager will explain the various financing and payment options available.

At buy here pay here car lots the process is usually reversed. The first step is a discussion of the borrower's current credit situation. Once the finance manager understands this, buyers are shown those vehicles on the lot that fit their income and credit profile.

BHPH car loan pros and cons


1. Available credit

The biggest advantage of in-house financing is that it gives most car buyers that have the funds for a down payment the opportunity to get transportation. In some cases, these dealerships aren't just an option — they may be the only choice for those consumers with terrible credit.

2. Trade-ins

BHPH dealers are typically more flexible when it comes to accepting trade-ins on older vehicles. The reason for this is the fact that they usually get long-term use out of cars that most new car dealers would rather not even have on their lots. Since buy here pay here dealers are more likely to find a buyer for an older vehicle, they're more likely to consider one as at least part of a down payment.


1. There is very little chance for borrowers to establish their car credit or raise their credit scores.

One of the best ways to either build or reestablish installment credit is by making timely payments on an auto loan. But this probably won't happen with a tote the note loan because BHPH dealers usually don't report loans or payments to the credit bureaus.

2. BHPH loan repossession rates are higher.

With a higher percentage of BHPH car loans ending in repossession, many buyers are locked into a cycle of paying very high interest rates and driving the older vehicles associated with these loans. BHPH dealers are happy to approve even those borrowers with multiple repossessions, just as long as they have a steady income and enough cash and/or trade equity for a down payment – a figure, by the way, that usually reflects what the dealer paid for the vehicle.

The Bottom Line

Even with credit scores below 640 borrowers should consider a BHPH auto loan only after exploring another option.

So even if you're a car shopper that's been turned down through a conventional lender, we want you to know that at Auto Credit Express we match people with auto credit difficulties to new car dealers that can offer them their best opportunities for approved car loans.

So if you're ready to reestablish your car credit, you can begin now by filling out our online car loan application.