When you need a car loan and your bad credit is holding you back, you might consider a loan from a buy here pay here (BHPH) dealer. These car lots can be a good option for someone who has been turned down for traditional financing.
What's a Buy Here Pay Here Dealership?
A BHPH dealership, also called a tote the note dealer, is a car lot where the dealer is also the lender. These dealerships offer in-house financing and don't rely on outside sources for loans. Because of this, they can be a go-to option for borrowers that have been turned down by other lenders.
These dealers may not always check your credit, but they do require you to meet income, residence, and down payment requirements. However, since they're not waiting on any third-party lenders to make a loan decision, a BHPH lot can be a quick, one-stop shop for someone that needs a vehicle fast.
Vehicles at BHPH Dealerships
BHPH lots only sell used cars, and your choice in vehicles typically ranges from older, high-mileage models to a diamond-in-the-rough or two. It really just depends on what the dealership has taken in on trade, or purchased at auction.
Even though you're only able to purchase used cars at a BHPH lot, don't expect their selling prices to be as low as those you might find elsewhere. In addition, these dealers typically charge higher than average interest rates, and sometimes require a down payment of 20% or more of a vehicle's selling price.
These drawbacks shouldn't deter you from working with a buy here pay here dealership, though. Having the option of getting approved for a loan without a credit check is often just the boost you need to get the credit ball rolling.
However, don't be surprised if your credit doesn't improve as you pay off your loan. BHPH dealers don't always report your on-time payments to the credit bureaus, which means this type of auto loan can't help your credit score the way other loans might. Ask the dealership if they report loans to the credit reporting agencies before you move forward if you want to improve your credit score.
Try a Subprime Auto Loan Instead
BHPH lots can be a great option for some buyers, but if you thought that they were the only option for a bad credit car loan, think again. There are lenders, called subprime lenders, that work with people who are struggling with credit issues.
Subprime lenders check your credit, but they know that you're more than just a credit score, and use additional factors to help them gauge your creditworthiness. Those things, such as your income, employment and residence stability, and a down payment, show them whether you have the ability, stability, and willingness to complete an auto loan.
Additionally, subprime lenders report loans and timely payments to the credit reporting agencies. With on-time payments, you can improve your credit score for future loan opportunities. With a better credit score, you could qualify for better interest rates, loan terms, and special car deals later on.
These lenders only work though special finance dealerships, however, and can't be found at every dealer. Here at Auto Credit Express, we know where to find the subprime lenders in your area. We work with a nationwide network of dealerships that have the lenders available to help bad credit borrowers get the auto loans they need.
So, if you're ready to get started on your next car loan, begin by filling out our zero-obligation, free auto loan request form.
