Buy Here, Pay Here: Here’s What You Need To Know

November 13th, 2015 by

A woman is sitting inside a car and handing keys to a car dealer while selling her car fast.

When you’re looking to buy a new or used vehicle, sometimes you run through a smorgasbord of options to try and figure out how to afford it. This can include borrowing through a loan or trying to sell your car fast to scrape together funds for a down payment on a vehicle. All of these options can be stressful, and that stress can be amplified if you don’t have good enough credit to get the financial help you need. An option that doesn’t include having to sell your car fast or going through the hassle of traditional loans is using dealer specific Buy Here, Pay Here options.

What Is Buy Here, Pay Here?

The term Buy Here, Pay Here refers to being able to get a loan directly from the dealership as opposed to going through a bank or credit lender. The dealer handles everything from finance approval, to loan approval, to payment collection. Payments may involve going to the dealership with money or a check or paying directly through the website. This is a great alternative as opposed to going through the conventional loan process where approval and credit scores can hamper potential loans, which in turn can prevent car shoppers from being able to make a purchase when they want to.

The Buy Here, Pay Here option opens up the opportunity for people with poor credit to be able to get a loan directly from the dealership without their credit scores being a cause for denial. The dealership will probably make you pay an installment on the car weekly or bi-weekly, but this will actually help you build credit and pay off your car faster. Buy Here, Pay Here is the quick and easy option for car buying.

A closeup shows a hand holding a pen over a car key and paperwork,

Do I Need Good Credit for Buy Here, Pay Here?

The benefit of Buy Here, Pay Here is that it’s easy for people with bad or no credit to get approved. So do you need good credit for Buy Here, Pay Here? No. In fact, as long as you can prove you have some kind of consistent income, you should be eligible for Buy Here, Pay Here. Even better, having a Buy Here, Pay Here loan can actually help you improve your credit score because it requires you to make consistent and frequent on-time payments.

The main purpose of Buy Here, Pay Here is to cut out the middleman. If you have trouble getting lenders to approve you due to your poor credit history, then the dealer can step in as a lender and get you squared away with a vehicle you can afford. In some ways, this makes the buyer/dealer relationship a lot more direct, as it removes the intermediary of having the bank or loan officers take charge of the goods. In the case of Buy Here, Pay Here, you know exactly who you’re paying, how much, and what you’re paying for.

Is a Subprime Auto Loan Better or Worse Than Buy Here, Pay Here?

Some people might be wondering if a subprime auto loan is better or worse than going with Buy Here, Pay Here. Well, the reality is that a subprime auto loan is neither good nor bad. Subprime is a classification for those who fit into what’s considered suboptimal credit rankings due to low income, poor credit history, no credit, or failure to get approved for secured loans.

If you have a credit score in the 600s or below, you could be eligible for a subprime loan. This means that lenders may still be willing to give you financing even though you have a bad credit score. However, there are some caveats to taking on a subprime loan. People who fall into the subprime category are considered to be a higher risk investment because they are considered more likely to default on the loan. This means that subprime loans will charge high interest rates and extra fees.

Subprime loans are something that can be difficult to attain for people with bad credit, where their credit score is lower than what most subprime auto loan lenders would be willing to approve. So if you have a good enough credit score for a subprime auto loan, you can explore that option. If your credit score is too low to get approved for even a subprime auto loan, then you can still make use of the Buy Here, Pay Here option offered by dealerships.

What are the Downsides of Buy Here, Pay Here?

For most car shoppers without any alternative auto loan options, there doesn’t seem to be any downsides to Buy Here, Pay Here. In some ways, that is true. If you don’t have any other options, a Buy Here, Pay Here program is almost guaranteed to let you get a car. However, Buy Here, Pay Here isn’t a perfect option, especially if you have the credit to qualify for a good car loan.

If you have good or even just decent credit, Buy Here, Pay Here probably doesn’t seem all that appealing since those with good credit will likely get a loan from their bank, and those who qualify for subprime loans will likely go with a subprime lender. The reason for this is because there’s the risk of paying more in interest rates for Buy Here, Pay Here, as opposed to traditional loans, which may make that proposition seem unappealing for some car shoppers. Buy Here, Pay Here loans also require weekly or biweekly payments that must be made on-time. While this can help with boosting credit scores, it can be financially stressful and inconvenient to keep up with,

Buy Here, Pay Here also limits the cars that you have available to choose from. While this does mean you won’t be able to buy a model you can’t afford, it also means you might not be able to buy the model you want most. However, having a limited amount of car choices might not be that big of a deal if you just need a car to take you from point A to point B.

A car salesman is standing in front of an orange car inside a dealership showroom and holding a clipboard.

Will Buy Here, Pay Here Affect My Credit Score?

Most Buy Here, Pay Here terms are sculpted around income, as opposed to traditional loan terms that focus on credit scores, which is in part based on credit utilization rates. In short, traditional loan terms are dependent on your credit score, whereas Buy Here, Pay Here is focused on the money you actually make. The reason for this is because Buy Here, Pay Here can sometimes carry higher interest rates based purely on your earnings. So you’ll pay what’s owed as a percentage from your regular income, as opposed to going by what your credit rating is.

For other secure loans or subprime loans, you’ll need to prove that your credit score is up to par, which means that you have to ensure that you have the credit to cover the cost of loan payments and that your credit utilization rate doesn’t have more debt than available credit for costs. In other words, your debt can’t outweigh your total available credit.
Any missed payments or poor credit utilization rates will work against your credit score under most banks and secure lenders.

Since most Buy Here, Pay Here loan terms are made directly with the customer, and without the oversight of a bank, it will vary if they will report payments (or missed payments) to credit bureau agencies. It’s something you’ll have to discuss with the dealer since making payments on time in a Buy Here, Pay Here scenario when you have bad credit can actually help you build credit. However, if you regularly miss payments and have to make up for it with high interest and late fees, then you probably don’t want that reported to the credit bureaus, as it will only worsen your situation. Ultimately Buy Here, Pay Here loan terms affecting your credit score will be situational, and it’s something you would have to discuss with the dealer before signing on the dotted line.

Is Buy Here, Pay Here Right For Me?

Now that you understand the risk/reward factors and overall gist of Buy Here, Pay Here loans, you now have an idea of how it measures up against traditional loans. Is Buy Here, Pay Here good for you? Well, if you want to sell your car fast, get some quick cash or use it as a trade toward another vehicle because you have bad credit, then Buy Here, Pay Here is a great way to get a quick loan in order to get back on the road. And with the ability to either pay in person or pay from the comfort of your chair with online bill payments directly to the dealership, it makes a very consumer-friendly alternative to some other lending options.

Even if it may not be the right option for everyone, Buy Here, Pay Here is certainly an attractive choice for those who have exhausted their credit line but need a loan for a quality vehicle. From Cincinnati to Seattle, you are sure to find a dealer that offers Buy Here, Pay Here opportunities. So, if you need to sell your car fast and get on the road in something new, consider looking for a Buy Here, Pay Here dealer today.