Car shoppers with less than perfect credit need to know the difference between the auto loans offered by subprime lenders and the loans offered by BHPH car dealers
Credit repair and auto loans

Consumers that have experienced past bad credit that are in the car market are sometimes unable to distinguish between the auto loan programs offered by the special finance departments of franchised new car dealers and those offered by buy here pay here car lots.

At Auto Credit Express we can understand how this happens because we've spent the past two decades helping car buyers with poor credit scores find those dealers that can give them their best chances for car loan approvals.

So here, in a nutshell, are the differences and why picking the right type can make a difference.

BHPH car lots

When taking out a loan through car lots that offers in-house financing, the loan arrangements and payments are made with the car dealer. That's because your credit is approved by the dealer instead of a third party, such as a bank or finance company.

Although some of these "tote the note" dealers will accept weekly or bi-weekly payments online or by phone, most require that customers make their payments in person at their location.

It should also be pointed out that a growing number of new car dealers have begun to offer this financing option – sometimes at their dealerships but more often at smaller satellite used car lots. While you typically won't see the words "Buy Here Pay Here" in most of their advertising, phrases such as "We Finance" usually indicates that they offer some type of in-house car financing.

In addition to the size and location of these lots, the buying process is also different. At most new car dealerships, the discussion about financing only happens once you've picked out a car. It's at this point that the finance manager at the dealerships helps you go over your financing and payment options.

At BHPH car lots the process is usually reversed. The first step is a discussion of your current credit situation. Once the finance manager understands what it is, you'll be shown those vehicles on the lot that fit your income profile.

BHPH loan pros and cons


1. Available credit

The biggest benefit of in-house financing is that it gives most car buyers the opportunity to get transportation. In some cases, these dealerships aren't just an option — they may be the only choice for buyers with extremely poor credit.

2. Trade-ins

BHPH dealers are usually more flexible when it comes to accepting trade-ins on older vehicles. That's because they usually get long-term use out of cars that most new car dealers would just as soon not have on their lots. Since tote the note dealers are more likely to find a buyer for an older vehicle they're more likely to consider one as part of a down payment.


1. Very little chance of establishing your auto credit or improving your FICO scores.

One of the best ways to either build or reestablish your credit is by making timely payments on a car loan. But the fact is this probably won't happen if you take out one of these loans because most BHPH dealers don't report loans or loan payments to the credit bureaus.

2. BHPH loan repossession rates are higher.

With a higher percentage of BHPH car loans ending in repossession, many buyers are locked into a cycle of driving older cars and paying the high interest rates associated with these loans. BHPH dealers are happy to take you on as a customer, often even if you have multiple repossessions, just as long as you have a steady income and enough money for a down payment – a sum that usually covers their cost in the vehicle, anyway.

As we see it

Even with credit scores below 640 you should only consider a BHPH auto loan after first checking out another option.

This means that even if you've been turned down for an auto loan through a conventional lender we want you to know that Auto Credit Express matches applicants with bruised auto credit with dealers that can offer them their best opportunities for approved car loans.

So if you're ready to establish your car credit, you can begin now by filling out our online car loans application.