Unfortunately, to get out of a buy here pay here (BHPH) contract, you can’t just return the vehicle to the car lot and walk away if you haven’t finished paying for it. If you do, it’s considered a voluntary repossession, and it negatively affects your credit score. Just like any auto loan, you’re bound to the terms stated in a signed contract. Even though you can’t just turn in your vehicle and stop paying for it, you don’t always have to stick with a car you no longer want if it’s not paid off – there are options available for you to consider to get out of a buy here pay here contract.
Getting Out of a BHPH Contract: The First Step
If you’re set on getting rid of the vehicle and know there’s still a loan balance, you first need to get a payoff amount from the lienholder. The payoff quote should list 10 days of additional interest from the date you request it, plus any fees or early payoff penalties, if applicable. This allows 10 days for the lender to receive the payoff funds.
Once you have the quote, you need to get the car appraised by at least two dealerships, but more is better for you. Then, you can compare offers and determine the better deal for you. When you have the appraisals, you then need to determine if you have equity.
Equity is when your vehicle is worth more than what you owe on the loan. To find out what your equity situation is, simply subtract the payoff amount from the appraised value. If the amount is positive, you have equity, if it’s negative, you have negative equity, meaning you owe more on the loan than the car’s actual cash value.
3 Options for Getting Out of a BHPH Contract
Once you determine your equity situation, you can choose which route you want to take to get rid of your BHPH vehicle. Options vary, but you generally have three to pick from:
- Sell it yourself – You can typically sell a car privately for more than what a dealer would offer you. This is a good option with negative equity if you can sell it for as much or more than the remaining loan balance.
- Trade it in to another dealership – If you have equity and no longer want to work with a BHPH dealer, you can simply trade it in to another dealership.
- Return the vehicle to the BHPH lot – If you have equity and want to work with the same dealer again, you can trade it in at the same lot you bought it from.
If you have negative equity, this can complicate the situation a little more. You're going to be responsible for the difference between what you owe and what you can get for your car. If you trade it in, you're either going to have to cover this difference with your own money, or roll it into your new loan – that is, if the lender allows you. We don't recommend rolling over negative equity into a new loan.
The Bottom Line
If your vehicle isn’t paid off, don’t just return it to the BHPH lot. This means you’re giving it up voluntarily, and it could be listed as a repossession on your credit reports. Make sure you go through the proper steps of determining your equity situation and pay the loan off if you want to get out of a BHPH contract.
On the other hand, if you need help finding a special finance dealership to work with, Auto Credit Express has got you covered. We have an extensive network of special finance dealers all around the country that can help you get an auto loan.
Our process is fast, free, and simple to begin. Just fill out our no-obligation car loan request form, and we'll get to work matching you with a local dealership!