Help with Buy Here/Pay Here Financing

October 25th, 2019 by

A car loan application with keys on it is shown.

One of the most stressful things for a lot of people is money; anything to do with money and finances are huge sources of anxiety for many of us. Whether it’s looking at monthly bills and finances or trying to figure out how to afford a vehicle when you’re in need, this is serious stuff that can lead to sleepless nights. Here at McCluskey Auto, however, we do everything we can to take the fear and anxiety out of financing and work with you to make sure you get what you need. One way we can do that is by providing Buy Here/Pay Here (BHPH) financing for our customers that can’t get approval from a traditional lender. Knowing the difference between Buy Here Pay Here vs Traditional Financing is something we can go over with you, and help you deside which is best for you.

But even figuring out if BHPH is the best option for you can be stressful, so let’s take a moment to look at what it is and how it works. This way, you’ll understand all of your options, and you can decide on what works best for you. While you might not have all the options you wish you had, it’s important to remember that you can take control of your finances and your future. So, let’s answer some big questions…

What is Buy Here/Pay Here Financing?

To start with, Buy Here/Pay Here financing is a type of auto loan in which the dealership, or a company owned by the dealer, acts as the lender. We’re going to repeat that because it’s the real defining aspect of this: the dealership itself is the lender for your auto loan. So rather than going through a third-party lender like a bank or credit union, you only work with the dealership you are at to get a loan for your vehicle.

That’s why it’s called “Buy Here/Pay Here” financing, because you buy your vehicle at the same dealership where you pay your loan back to. Sometimes you’ll also see this advertised as “no credit” financing or something similar, but it all basically works the same way.

Is BHPH Different from Traditional Financing?

Yes, in some significant ways it is very different from traditional financing. With a traditional auto loan, you go to a dealer, look at vehicles to find one that you want and think you can afford, and then apply for a loan. The financing folks at the dealership work with you to look at different loans from banks and similar lenders that you qualify for to find one that will cover the vehicle you want. You make a down payment on the vehicle, get your loan all settled with the lender, and drive away – paying off the loan over time back to the bank.

With Buy Here/Pay Here financing, there is no other lender involved, so no bank runs a credit check on you or anything else. You typically will start off the car-buying process by looking at your financing. The dealership will ask for proof of your address and income, so they can see how much of a loan you qualify for based on how much you make, rather than your credit history. Once this is determined, then you can look at vehicles that fall within your established budget and find one that meets your needs.\

Customers are at a bank in Cincinnati, OH trying to get a traditional car loan.

What are the Pros of Buy Here/Pay Here?

The biggest advantage to Buy Here/Pay Here financing is that just about anyone can qualify for it – so long as you have a permanent address and employment with proof of income, you should be all set. With traditional auto loans, you need to have a credit check ran on you, and if the lenders don’t like what they see, then you won’t get a loan. If you have poor credit, whether it’s your fault or not, or have very little credit established, then getting a car loan can be difficult.

You also typically do not have to pay much of a down payment when getting BHPH financing – sometimes, no down payment will be required at all. If you have a vehicle you want to trade-in to help with your new purchase, then a BHPH dealership might be easier to work with because they often take in a wider range of vehicles. You also know exactly who you’re dealing with – there’s no third-party that you have to worry about, just you and your dealership.

Finally, getting BHPH financing on a vehicle can be a great way to start building or rebuilding your credit. You need to make sure you make all of your payments on time for it to have a positive effect on your credit, though. Please keep in mind, not all dealerships actually report your payments to credit bureaus – so ask about this before you sign anything to make sure your repayment will help make future auto loans easier to get.

What are the Cons of Buy Here/Pay Here?

The biggest disadvantage of a Buy Here/Pay Here auto loan is that the interest rate on it will often be quite a bit higher than what you’d get with a traditional auto loan. This is because people without credit or with poor credit are seen by lenders as a higher risk – there’s nothing there to show they have a good history with repaying a loan. Higher interest rates mean a lender is more likely to make back their money on a loan in the case that something goes wrong or the borrower fails to make all the payments.

You can still shop around between different BHPH dealerships, however, to see where you can get the best terms for a loan on a vehicle. You should also be careful about total costs on paying back a loan over time – you can end up paying more with a BHPH loan than a vehicle is worth if the interest is too high or you make payments that are too low and drag out the loan for a long time. These are very important details that you need to understand before you sign anything.

What Type of Financing is Right for Me?

Ultimately, the answer to this will come down to what your credit history looks like and the best loan you can get. If you have good or decent credit, then a traditional auto loan is probably the right choice for you, since it’s where you’ll find the lowest interest rate. If you plan on making a large down payment to minimize your loan amount, then a traditional option is also likely to be best for you.

A salesman is helping a couple with choosing a buy here pay here vs traditional financing loan in Cincinnati, OH.

On the other hand, if your credit is poor or you don’t really have any credit history built up yet, then a Buy Here/Pay Here loan might be the best way to go. While the interest will be high, it’s an option that gives you a vehicle when no one else is willing to help. Just be sure to choose a dealership that reports your payments to credit bureaus so you can rebuild your credit while you pay off your loan – and remember to always make payments on time.

Anything Else I Need to Know?

Always be careful with any kind of auto loan and make sure you read through the terms and conditions of the loan thoroughly before you sign. In particular, make sure you understand the interest on the loan, how long you’ll be paying it back, and how much you need to pay each month. Some BHPH lenders require weekly payments or payments every two weeks that might have to be made in-person at the dealership, so find out about this ahead of time.

Finally, remember that you can take control of your finances, no matter how bad things might look or feel right now. A BHPH loan can be a good way to start building positive credit, just be careful about all the details and make sure you go to a dealership you can trust.

Posted in Buy Here Pay Here