There are fundamental differences between a bad credit car loan obtained through a franchised new car dealer and the type of loan offered by tote the note used car lots.

The basics

Sometimes, it's good to get back to the basics. For today, at Auto Credit Express, that means discussing the difference between special finance car loans and buy here pay here (sometimes called “tote the note”) car loans. Although both loans are part of the subprime car loan market, there are marked differences between the two. Here is a description of both and the advantages and disadvantages of each type of loan:

Buy Here Pay Here Bad Credit Loan

This is a loan that you would be arranged at a buy here pay here car lot. Also known as “in-house” financing, the loan consists of a down payment plus a fixed number of loan payments. The loan payments are due every week and are usually made in person at the lot from which you purchased the car. You are, in actuality, borrowing money from a lending entity owned by the dealer. If you fall behind on your payments, you'll need to speak with the dealer regarding other payment arrangements. If you stop making payments, it is the dealer who will repossess the car. The dealer also has the option of whether or not to report your payment history to the 3 major credit bureaus. As a rule, the dealerships that offer these types of auto loans for bad credit generally sell only used cars. Very rarely do they sell, or are in any way affiliated with, new cars or a new car franchise.

Advantages: The cars are usually less expensive. Many people prefer to make payments on a weekly basis. Payments are made face to face so you know your lender personally and they know you personally. Many dealers don't bother with a credit check before selling you a car.

Disadvantages: Most buy here pay here dealers do not report car payments made by customers to the credit bureaus. Required down payments are an inordinately high percentage of a vehicle's actual value and the cars offered for sale are usually older and have high mileage. As a result, some of the cars offered for sale by “buy here and pay here” dealers are not that reliable and Carfax vehicle history reports are usually not furnished by the dealer for these vehicles. Loan terms usually range from 12 to 24 months, limiting the amount of the loan to lower-priced older cars. Interest rates can be extremely high. Finally, for most people, it is usually not convenient to visit the selling dealer every week in order to make a loan payment.

Bad Credit Car Loan

This type of loan, sometimes called a special finance car loan or a credit repair car loan, is usually available only through a franchised new car dealer. The car that you are financing can be either a new car or a used car. Although the dealer sells you the car, the finance contract is sold to a bank or lending institution. There is normally a down payment plus a fixed number of loan payments. The loan payments are made to the bank once a month usually by mail or electronic debit from your bank account. Since the lender holds the finance contract to your car, any issues of payment or non-payment are made with the lender. Most of these types of subprime lenders will report your payment history to each of the 3 major credit bureaus. You can even apply for this type of loan online. Our web site,, allows you to complete a loan application in the comfort and privacy of your home.

Advantages: Most bad credit auto loan lenders report to the 3 major credit bureaus. This is important if you're trying to repair your credit history and re-enter the traditional auto loan market. The selection of vehicles from a new car dealer is greater. The vehicles are, generally, either new with no miles or newer used vehicles with lower miles. In many instances, Carfax vehicle history reports are available for most or all of the used vehicles these dealers carry in inventory. Loan terms start at 24 months and can extend to as many as 72 months, making a more expensive car more affordable.

Disadvantages: Not all franchised car dealers offer this service and the level of experience and expertise in these special finance departments can vary widely. The selling price of the cars is usually higher, due to the fact that we're dealing with newer vehicles with lower miles. Interest rates are still high, due to the nature of the loans and any problems that you encounter while repaying the loan will be reflected in your credit report.

As we see it

If you are interested in cheap transportation that doesn't require a credit check, then the buy here pay here dealer wins. However, if you are more concerned about raising your credit score and re-establishing your car credit, the bad credit auto loan is the obvious choice. At Auto Credit Express, we have helped thousands of customers re-establish their credit while driving dependable new or newer pre-owned vehicles. To avoid the disappointment of not finding a dealer that offers a professional approach to special finance bad credit car loans, simply visit us on the web at