What is Buy-Here-Pay-Here?
Buy-here-pay-here is an alternative to traditional financing when purchasing a pre-owned vehicle. While it is generally easy to get approved through a buy-here-pay-here program, there are some downsides worth mentioning.
A closer look at buy-here-pay-here will show it often makes more sense to purchase a vehicle using a traditional financing source such as your local credit union or bank.
Let’s start with the basics of how most Buy-Here-Pay-Here financing works:
- The dealership administers the loan, sets the terms and payment schedule. A down payment is typically collected up front. Buy-here-pay-here terms are usually weekly and require frequent visits to the dealership.
- The approval decision is usually made without a credit check or solely on the customer’s credit file.
- Most buy-here-pay-here approval decisions are made by the percentage of the wholesale value of the vehicle financed covered by the initial down payment. In many cases the initial money down covers nearly all the amount the dealership owns on the car.
- The amount of risk is the difference between the down payment and the wholesale value.
- If the payments are not made the dealership is usually responsible for vehicle recovery.
- The dealership almost never reports the transactional history of a buy-here-pay-here loan unless it is bad or in default. That means nothing is done to improve your credit, even if they say it is.
What We Do Different
The vehicles sold at buy-here-pay-here lots are typically older and higher mileage. Since the loan decision is made by the amount you have “in” the car, only the most inexpensive and older vehicles make it to the buy here pay here lot. These vehicles are not typically available with any warranty or are eligible for any service contracts.
In the end the best decision is to choose a dealership that is willing to work to obtain financing for you, & one that has numerous financial resources with money to loan. Bank financing, even if the rate is a little higher than usual, is still a much better option for most. The AutoStar team of financing experts is the best in the Hendersonville, Asheville and Waynesville areas when it comes to obtaining bank financing and freeing customers from the burdensome terms of buy-here-pay-here financing.