Buy Here Pay Here is a term used for dealership car-buying programs that allow you to finance the vehicle with them. This term usually indicates that you’ll have a less difficult time getting approved if you have poor credit or no credit. However, there are some drawbacks to going this route when buying or leasing a car.
How Does Buy Here Pay Here Work?
A buy here pay here dealership typically has a program for buyers with poor credit who would otherwise have a hard time getting traditional vehicle financing. In this scenario, the dealership provides its own financing to the buyer. When you enter a program like this, you typically won’t have to get a credit check, but you will need to prove that you can afford the monthly payments by providing income information. Given that there’s no credit check, a buy here pay here loan is usually not reported to credit bureaus unless you miss a payment.
Advantages of a Buy Here Pay Here Loan
The main advantage of a buy here pay here loan is easier access to credit. If you have no credit or a low credit score, this type of loan is usually less strict in its criteria for approval. For some people, it might be the only way to finance a car. The buying process is usually simple and many dealers don’t require a down payment. If a down payment is required, it’s generally not a big one.
Disadvantages of Buy Here Pay Here
The biggest negative aspect to a buy here pay here loan is the high interest rate. Because of this high rate and possibly no down payment, you run the risk of ending up underwater on the loan. In other words, the vehicle’s value may go down faster than you’re able to pay off the loan. Many buy here pay here dealers do not report these loans to credit bureaus, which can hamper your attempts to build credit. Some dealers require large down payments to secure this type of loan as well. If you end up behind on your payments, you have fewer options to avoid repossession.
Can the Dealership Repossess Your Car?
Before you agree to a buy here pay here loan, it’s crucial to ask the dealer about its policy on repossession. As mentioned above, you won’t have much recourse if that’s what they decide to do. You should know upfront what the dealership will do if you miss your payments. In some cases, missing only one payment could put you in default. Some dealers will repossess your car without notice by using tracking devices or kill switches. Dealers typically report negative activity on a buy here pay here loan, so defaulting will hurt you in the long run.
The Buy Here Pay Here Bottom Line
Ultimately, a buy here pay here loan can be a valuable service for someone who has the income to make payments, but whose credit isn’t good enough to get a regular loan. If you have poor credit, it’s better to pay cash if you can, but if you can’t, this is an option that can put you in a car quickly.
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