Buy-here-pay-here (BHPH) dealerships tend to get a lot of bad press, but you won't necessarily have a negative experience if you purchase a vehicle from one of them. It is possible to successfully navigate BHPH financing, but you have to know what you're getting into.
Also, if something does go wrong, it will be useful to understand your legal rights.
Why Buy-Here-Pay-Here Dealerships are Different
Traditional car dealerships use the services of third-party lenders in order to offer vehicle financing. They may sell the cars, but they don't fund the loans. However, this is not the case with buy-here-pay-here dealers.
These types of dealers are also lenders. So, instead of going through third-party lenders, they do all of their financing in-house. Because of this, they're able to offer loans to buyers with all types of credit. In fact, they may not even run credit checks on customers. Basically, as long as someone can prove that they earn enough money to make a car payment, they can be financed at a BHPH dealership.
Of course, most of the cars that can be purchased from BHPH lots will be older vehicles with a decent amount of mileage on them. Buyers will also notice that the purchasing and repayment process is different.
- A down payment is required nearly 100 percent of the time.
- Instead of monthly, the buyer will usually make payments weekly or biweekly.
- Payments often have to be made in person at the dealership.
BHPH customers also need to be aware of the fact that their car will most likely come with a GPS device installed. This device will allow the dealer to easily locate and possibly repossess the vehicle if a payment is missed. Some dealers may even equip vehicles with a "kill switch" that can remotely disable a car if a payment is late.
Finally, when looking for a buy-here-pay-here dealer, it's important to find one that regularly reports loans and payments to the credit bureaus. Otherwise, regularly making payments on time will do nothing to improve your credit.
Buy-Here-Pay-Here Dealerships and Lending Laws
It's important to remember that buy-here-pay-here dealers are also lenders. This means that there are lending laws to which they must adhere. Granted, when you buy a car from a BHPH lot, there are certain inconveniences that you can't avoid. Such as:
- A much higher-than-average interest rate
- Paying more than the average price for a used car with higher mileage
- An inconvenient payment schedule
- The possibility of having your car disabled or towed if your payment is late
However, you should also expect your rights to be protected. For example, because they offer loans, BHPH dealers must adhere to the Truth in Lending Act (TILA). Under TILA, Regulation Z dictates that the following must be included in a written contract if you take out a loan to purchase a car:
- It must be disclosed that the lender has retained all or portions of the amounts charged to you.
- The cash price of the vehicle must be accurately disclosed.
- The total amount being financed must be accurately disclosed.
Therefore, if you purchase a vehicle from a BHPH dealership, you will need to verify that the paperwork you receive is complete. If any document is missing or if any piece of information is omitted or improperly disclosed, you may seek legal recourse.
And while all of this is important, the best way to make sure your BHPH goes smoothly is to keep up with your payments. As long as you pay on time, every time, nothing bad can happen. Also, if you're working with a dealer that reports loans and payments, your credit score could increase during the course of your repayment period. Then, you may not have to purchase from a BHPH lot the next time you need to buy a car.
Financing Options for Bad Credit Car Buyers
Before assuming that a BHPH dealer is your only option, try contacting Auto Credit Express. We've been helping car buyers with credit issues for nearly two decades, and we'll work hard to get you the assistance you need. How? We can match you with a local dealership that can work with unique credit situations.
Our service is free and comes with no obligations, so you have nothing to lose. Go ahead and fill out our simple and secure auto loan request to get started today.