Buy Here Pay Here versus Lease Here Pay Here: Which is Better?

November 30th, 2015 by

A car salesman is shaking someone's hand as he holds out a set of keys at a Buy Here Pay Here in Ohio.

If you’re someone with great credit, a retirement fund, and money in savings, then you’ve probably never needed to worry about finding the right Buy Here Pay Here Ohio dealership. However, for many people, life can get complicated, and it’s easy to end up in a bad situation where poor credit can make shopping for a car a lot harder. That’s when a reputable Buy Here Pay Here (BHPH) dealer can be quite beneficial, providing people who have otherwise been overlooked, and denied a loan for a vehicle with a car that can help them get back on track.

Choosing the right BHPH dealership is very important, as far too often, this type of financing has been used to take advantage of people who might be desperate or in a tight spot. You should also consider whether a traditional BHPH opportunity or a Lease Here Pay Here (LHPH) dealership might be a better option for you. In general, we recommend BHPH for our customers as a great way to rebuild credit and have a vehicle while you do so. An LHPH solution can work for some people, but it’s a very niche situation that we don’t see very often.

The Basics – Buy Here Pay Here Financing

Before we get into figuring out which kind of financing solution might be best for you, let’s take a moment to look at each option and get a good sense of what they are and how they work. Old-fashioned or traditional auto financing has you receiving a loan to pay for a vehicle and then paying that loan back over several years. In this type of situation, you get the loan from a third-party lender other than the dealership; this third party is typically a bank, credit union, or similar financial institution.

With Buy Here Pay Here financing, however, there’s no third-party lender involved. Instead, the dealership where you’re buying the vehicle acts as the financial institution, and they provide you with the loan for the vehicle. So you go to the dealership, figure out how much of a loan you qualify for, and then choose from vehicles that you can afford. You buy the car at the dealer and you pay back the loan at that same dealer over the course of several years.

A man and woman are financing with a calculator and tablet.

The Basics – Lease Here Pay Here Financing

Lease Here Pay Here financing works in much the say way. Only instead of a loan for you to pay off, you instead are paying for a lease at that dealership. When looking at cars, you have a couple of different options for how you want to handle financing. You can buy a car, usually with a loan, which means the lender gets the title and hangs onto it until you finish paying off the loan. Once you pay it off, then you get the title and own the car.

With a lease, you never actually buy the car or end up owning it; you’re essentially renting the vehicle for an extended period, usually two or three years. At the end of the lease term, you return the vehicle to the dealership. Once all is said and done, your lease is over, and you’re free to choose another vehicle – the title never changes hands.

An LHPH dealership will lease you a used vehicle – most traditional lease agreements are for new models – that you drive for several years on the lease. You pay the dealership during that time just like you would with a BHPH financing solution. At the end of the lease term, you return it to the dealership, and as long as everything looks good, you’re then free to get another lease or buy a vehicle. But you don’t end up owning anything.

Pros and Cons of This Type of Financing

BHPH and LHPH financing has one huge benefit: dealerships that provide this kind of financing will typically work with just about anyone. Customers who have bad credit will often find it difficult to get a loan from a bank or similar lender since their poor credit history makes them a risk from the lender’s perspective. However, a BHPH dealership will even offer financing to people with poor credit or limited credit history. All you typically need is proof of employment and a permanent address – sometimes, there’s no credit check involved at all.

So for people who have been denied a loan when trying to get a vehicle, a BHPH dealer can really be a savior. Of course, people with bad credit are still seen as a risky choice for a loan, so BHPH dealerships will charge higher interest rates than what someone with good credit would pay on a loan from a bank. This may seem unfair, which is understandable, but it helps offset the risk of someone defaulting on a loan and no longer making payments. Unfortunately, some dealerships have imposed excessively high interest rates, which is why it’s important you choose the right dealership.

A row of cars parked at a dealership are shown from a low angle.

Should You Choose BHPH or LHPH?

Deciding on whether a BHPH or LHPH financing solution is best for you really depends on your situation and what you’re looking to get. If you want to own a vehicle at the end of the payment period, then a BHPH dealer is a great choice that can help you get your credit back on track. On the other hand, if you need something to drive, but you’re not interested in actually owning and buying a vehicle, then LHPH can certainly be a fine option.

In general, your best bet is to figure out what options you have and shop around to see how you can get the right vehicle at a fair interest rate. If you desperately need a new car right now, then an LHPH solution with relatively low interest might be the right choice at the moment, and you can always save toward buying something better down the road. That being said, some people prefer leasing vehicles as it usually means lower monthly payments, and you are not tied to a single vehicle.

Buying and leasing a car both have their pros and cons, and we suggest that you talk with our staff to figure out which option is right for you. If you find yourself in rough shape with a credit score that has made securing a loan for your next vehicle seem impossible, then a good BHPH or LHPH dealership can definitely be the way to go. Just try to take your time and do some research so that you find a reputable dealer that puts your needs first. Look for one that reports your payments to credit bureaus so that as you make payments on your loan, you rebuild your credit score and get on track for an easier car-buying experience next time.

McCluskey Automotive is Here to Help

No matter what your financial situation and credit history look like, we are here to help you with everything you need. Just like no single car is right for everyone, so too is no single financing solution right for everyone. That is why our financing experts will work closely with you to figure out exactly what solution best meets your needs. Call or come visit our dealership in person today to learn more and let us show you how easy shopping for a vehicle can be.