A buy here pay here (BHPH) dealership can be a good way to get a vehicle quickly when your credit score is suffering. Before you head out to a BHPH dealer, here’s how they work, how to decide if you need one, and other bad credit vehicle financing options to consider.
Buy Here Pay Here Dealers
A BHPH dealer is where you arrange a car loan and make payments on it right at the dealership. These dealers may also be called tote the note car dealers, or in-house financers. You purchase the vehicle through dealer financing instead of a third party, such as a bank, credit union, or bad credit lender.
Instead of making monthly payments to a traditional lender, you typically make weekly or bi-weekly payments at the dealership. Although many tote the note dealers accept payments by phone and online, some still require you to bring in a check or cash to their location.
In many cases, the difference between BHPH dealers and subprime lenders is shrinking, especially with the convenience of online shopping and payments. Some franchised dealerships even offer options similar to in-house financers. However, when you're shopping for a bad credit car loan, it's a different experience to shopping at a tote the note lot.
When to Visit a BHPH Dealer
The most important benefit of BHPH car dealerships is that they give credit-challenged people the opportunity to get much-needed transportation. In many cases, these dealerships aren't just an option – they may be the only choice if you've been turned down by traditional lenders.
Other times to turn to a BHPH dealer are when you're struggling with low credit, or have trouble proving your income is from all one source.
BHPH dealers have less stringent requirements when it comes to proving your qualifications for a car loan.
Benefits of Using a Tote the Note
One-stop shopping and quick qualification. Since the dealer is the lender at BHPH lots, there's no waiting around for financing approval from a third party. You can check out the vehicles available to you, discuss your needs with the dealer, and then they can let you know right away if you're getting an approval or not. Often you can go in for an auto loan and come out with a vehicle on the same day.
Less possibility of a credit check. Not all BHPH dealers run a credit check, and this is what appeals to many consumers. Without a credit check the dealer relies on your proof of income, and willingness to provide a large down payment in order to gain approval. Sometimes, tote the note dealers require as much as 20% down on a vehicle.
Convenient payment schedules. Making more than one payment a month isn't convenient for all borrowers, but if you're on a tight budget, being able to make a few payments on the day you get a check can help keep you on track with your car.
Disadvantages to BHPH Loans
Selection may be limited, used cars only. One disadvantage to BHPH dealers is that they only deal in used vehicles. Your selection is limited to what is on the lot, and many cars may be older, higher-mileage models.
Higher interest rate likely. Because they don't always refer to your credit reports to see how you've handled credit in the past, many BHPH dealers charge a high interest rate to offset their risk. It's likely that interest rates can reach well over 20%.
Less chance for credit repair. Since these dealers don't often check your credit, they also might not report your timely payments to the credit bureaus. Without a record of your full on-time payments, your auto loan isn't likely to raise your credit score that way a bad credit car loan, which is always reported, can.
Another Bad Credit Car Loan Option
Aside from BHPH dealerships, you may be able to secure a bad credit car loan with a subprime lender. These lenders are third-party and signed up with special finance dealerships.
These loans are based on both your credit and your ability to prove you can take on auto financing. You don't meet directly with a lender, you work with a special finance manager at a dealership instead.
You may need to work with a subprime lender if your credit score is around 670 or lower; you've had trouble keeping up with loans in the past; or if you've had bankruptcy or repossession which dropped your credit score.
Unlike BHPH auto loans, subprime lenders report their loans to the credit bureaus – giving you the opportunity for credit repair.
Give Us a Shot First!
Before heading to a BHPH dealer, let Auto Credit Express connect you to a special finance dealer in your area. We work hard to make sure that borrowers who are struggling with bad credit, no credit, and bankruptcy have a hassle-free time finding a dealership in their area. Our network of special finance dealerships is signed up with subprime lenders to help in many situations.
We can connect you with a dealer free of charge. Simply fill out our fast, convenient auto loan request form.
